The Quick Read: A solar system usually shows up on a VA cash-out file in one of five ways: owned, financed with a secured loan, leased or PPA, paid through a property tax assessment, or financed with an unsecured loan. Each one touches title differently, and the new VA loan has to close in first lien position. Most of the work is finding the filing, then paying it off, releasing it, or subordinating it before closing. No VA rule is written for “high-cost closing states.” The state effect comes from local recording practice, state assessment laws, and higher title and recording charges.
Why Solar Becomes a Lien Question on a Cash-Out
A VA-guaranteed loan has to be secured by a first lien on the property. VA’s PACE circular says so and puts the job of securing that position on the lender. If first-lien position can’t be secured, VA can remove the guaranty for the life of the loan.
Here is the catch. A solar company rarely records a mortgage. It files something else, and that something can still cloud title. The file fails when nobody finds the filing until the title commitment lands.
A cash-out refinance triggers the full review. It needs an appraisal, full underwriting, and a title examination. A VA streamline refinance generally skips the appraisal and underwriting, so solar problems seldom surface there. Cash-out is where they do. The VA cash-out refinance program is the path that reaches the full lien review.
One note on scope. Everything here is national. State law decides where filings are recorded and how assessments rank, so the details change by state.
Key Terms Defined
First lien position: The new VA loan must be the first claim against the property, ahead of other recorded liens.
UCC-1 filing: A notice a solar provider files to claim the panels as collateral. It is often filed with the state, not the county.
Fixture filing: A UCC-type filing recorded in the county land records, so it shows up in a standard title search.
Subordination: A written agreement where a lienholder agrees to rank behind the new VA loan.
UCC-3 termination: The filing that releases a UCC-1 once the solar debt is paid.
PACE assessment: A solar or energy loan repaid through the property tax bill, which can rank ahead of a mortgage.
Net tangible benefit: A test the lender runs to show the new loan is in the borrower’s financial interest.
The Five Solar Structures and What Each Does on Title
| Structure | How it shows on title | Likely closing step |
|---|---|---|
| Owned outright | Nothing | None |
| Financed (secured) | UCC-1 or fixture filing | Payoff and release, or subordination |
| Leased or PPA | UCC-1, sometimes a fixture filing or memorandum | Transfer with provider consent, or buyout |
| PACE assessment | Tax assessment | Payoff at closing in most cases |
| Unsecured solar loan | Nothing on title | Counted as a monthly debt |
The unsecured loan treatment is lender practice, not a VA rule. The lender still counts the payment in underwriting.
How the Deal Works, Step by Step
1. Identify the instrument. The signed solar contract answers this. Owned, financed, leased, PPA, or assessment: each leaves a different footprint.
2. Gather the paperwork before applying. That means the solar agreement (term, escalator, transfer clauses), any recorded UCC-1 or fixture addendum, a payoff or buyout quote, and a letter from the provider. This is industry practice, not a VA checklist. A late-discovered filing is the usual reason a cash-out stalls.
3. Run the title and UCC search. A state-level UCC-1 may not appear in a county title search. A fixture filing recorded in county land records will. A clean title report does not prove there is no solar filing. Ask the title company to search both.
4. Clear the lien. There are three usual paths: payoff with a UCC-3 termination, a lease or PPA transfer with the provider’s consent, or subordination to the new VA lien. The federal consumer-finance regulator’s solar financing spotlight says a UCC lien is technically on the panels, not the house, but it can cloud title and must be released or subordinated to the new mortgage.
5. Appraisal. The VA appraisal sets the reasonable value. The lender should tell the appraiser who owns the panels. Confirm it against the VA Lenders Handbook before relying on it.
6. Underwrite. Full credit, income, and residual income apply. Residual income is a central VA test, read together with credit and debt-to-income. A solar loan or lease payment is a debt in the file.
7. Close in first lien. The title policy and recording have to show it.
What Decides the Outcome
Four things carry the file:
- The type of solar instrument.
- Whether any filing can be released or subordinated.
- Whether a PACE assessment sits ahead of the VA loan for its full balance.
- Whether the appraisal supports the value the borrower expects.
Everything else is paperwork around those four.
Where the General Rule Breaks: PACE
PACE is the hard edge case. Under VA’s circular, a property with a PACE obligation can be eligible only if the lender confirms three things: state law collects the obligation like a special assessment, no lien is superior to the VA loan for the full outstanding PACE balance at any time, and any superior claim covers only delinquent regularly scheduled installments.
Many states give assessments priority over mortgages. If the priority covers the full balance, the file fails the VA test. The practical fix is payoff at closing. The circular says terms vary by state and program, so the actual state statute matters.
The cost side matters too. The CFPB’s PACE rule announcement reports that PACE loans raised borrowers’ property taxes substantially. It also found PACE borrowers were more likely to fall behind on their first mortgage. That raises the tax and escrow side of the budget.
Other Edge Cases
Fixture filing versus state UCC-1. Only the fixture filing appears in a standard county search. State law differs on where filings go and whether panels count as fixtures. A title company that searches only the county can miss the state filing.
Paying off solar debt through the cash-out. The solar balance can be paid from loan proceeds. That cuts the cash the borrower takes home. It also has to pass the net tangible benefit test, which is not automatic. The lender checks it.
Financing new solar through the cash-out. This is a separate path under VA’s Energy Efficient Mortgage rules. VA News says approved improvements can be rolled into a VA refinance if they are permanent fixtures, and solar heating and cooling systems are listed. The older handbook text, hosted as a VA pamphlet copy on ENERGY STAR, sets dollar tiers where larger improvements need support from lower utility costs or higher value. That copy is older. The current KnowVA text governs, so confirm before quoting any tier.
VA-to-VA versus other payoffs. Seasoning and the fee recoupment test apply when the loan being paid off is VA-guaranteed. VA Circular 26-19-05 sorts refinances into Type I, where the new loan does not exceed the payoff, and Type II, where it does. The 36-month recoupment applies to Type I VA-to-VA loans.
Occupancy. A VA cash-out is for the borrower’s own home, or a spouse’s or dependent’s for active-duty servicemembers. The question is the borrower’s primary residence, and nothing else changes that.
The Numbers That Frame the Loan
Across the wholesale programs Lendmire works with, the VA cash-out reaches 100% of the appraised value, including the financed funding fee, and refinances any loan type into VA. The same seasoning and net tangible benefit rules apply. Programs start at a 580 decision score, subject to lender guidelines.
The funding fee on a cash-out is 2.15% for first use and 3.3% after, per VA’s funding fee page. It does not drop with a down payment. Veterans receiving compensation for a service-connected disability and other exempt groups can have it waived. The fee can be financed, but only inside the 100% ceiling. Anything over it is paid in cash.
What a High-Cost Closing State Changes
It changes the dollar size of the lien-clearing work, not the rule. Title searches, recording charges, and local transfer costs run higher, and a solar payoff comes with its own recording of a termination. No VA figure exists for state-by-state closing costs, so treat this as a budgeting point, not a calculation. VA also limits which fees a borrower can be charged, so lien-clearing costs belong on the Loan Estimate and get reviewed there.
State law can also change how a filing is made or how an assessment ranks. That is the real state variable, and it is why the title search has to match the state.
A Scenario in Plain Words
Picture a veteran with a financed solar system and a first mortgage that is not VA. The owner wants cash out. Title shows a fixture filing. The solar company will release it on payoff. The lender runs the net tangible benefit test, the appraisal supports the value, and the payoff comes out of proceeds. Cash to the borrower is smaller than the equity number suggested, because the filing release, the funding fee, and the payoff all come out first.
Now change one fact. The solar is a lease, and the provider won’t release but will consent to a transfer. The file now depends on the provider’s response and on how the lease payment counts as debt. Same borrower, different path.
Common Mistakes
- Assuming a clean title report means no solar filing.
- Treating a leased system as added value in the appraisal.
- Waiting until the title commitment to learn about a PACE assessment.
- Assuming 90% is the VA cap. VA’s limit is 100% of reasonable value. Some lenders set their own lower caps.
- Expecting the funding fee to fall with a down payment on a cash-out.
- Ignoring the provider. A solar company that won’t subordinate or release can stall the whole file.
What to Ask the Title Company
- Did you search the state UCC records and the county land records?
- Is there a fixture filing, a UCC-1, or a PACE assessment?
- Will the provider release, subordinate, or transfer?
- What are the recording charges for the termination?
If the provider refuses, the options narrow to payoff or a different structure. Reviewing the loan program before the appraisal is ordered can sort out which route fits.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Frequently Asked Questions
Does a solar lien stop a VA cash-out refinance?
Not by itself. The new VA loan must be in first lien position, so the filing has to be paid off, released, or subordinated. A PACE assessment that ranks ahead for its full balance is the harder case, and payoff at closing is the usual fix. Everything is subject to lender guidelines and full file review.
Will leased solar panels add to my home’s appraised value?
Usually not. Appraisal-education guidance says VA leased and PPA systems are generally excluded from value, though that is secondary guidance. Confirm it against the VA Lenders Handbook. A home that relies on leased panels may not appraise to the value you expect.
Can I pay off my solar loan with the cash-out?
Yes, from loan proceeds, which reduces the cash you receive. The refinance still has to pass the net tangible benefit test, and the lender checks it. It is not automatic.
Can I finance new solar through a VA cash-out?
VA’s Energy Efficient Mortgage rules allow approved, permanent energy improvements to be rolled in, and solar heating and cooling are listed. Larger amounts need support from utility savings or value. Current handbook text controls.
Does the funding fee change with a down payment on a cash-out?
No. On a cash-out it depends on prior VA use: 2.15% first use, 3.3% after. Exempt veterans can have it waived.
If you are weighing a cash-out refinance against keeping the loan you have on the home you live in, Lendmire can help you compare the programs and the equity each one reaches. Call 828-256-2183, or request a scenario review with Lendmire.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and home buyers in 16 states with FHA, VA, conventional and jumbo purchase and refinance loans arranged through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and the agency guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. VA Circular 26-16-18 (PACE processing)
2. CFPB’s solar financing spotlight
3. CFPB’s PACE rule announcement
4. VA News, Energy Efficient Mortgages
5. VA pamphlet copy on ENERGY STAR
6. VA Circular 26-19-05 (cash-out refinances)
7. VA, Funding fee and closing costs
This article is part of Lendmire’s VA Loans series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: VA Cash-Out Refinance Land Rules for Acreage in a High-Cost Closing State · Does a Spouse Have to Sign a VA Cash-Out in a High-Cost State? · VA Cash-Out Condo Questionnaire Requirements in High-Cost Closing States
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.