Refinance guide refinancing a mortgage with solar or PACE liens

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Refinancing a Mortgage When You Have Solar or PACE Liens

Refinancing a mortgage can lower monthly payments, reduce interest costs, or unlock home equity. But when your home has a solar system financed through a loan/lease or a PACE (Property Assessed Clean Energy) assessment attached to the property, refinancing becomes more complex. This guide explains what you need to know, when refinancing makes sense, the trade-offs, costs, step-by-step actions, common pitfalls, and short FAQs to help homeowners move forward with confidence.

What this is and when it makes sense

“Refinancing with solar or PACE liens” means replacing your current mortgage with a new one while an existing solar loan/lease, power purchase agreement (PPA), or a PACE assessment remains tied to the property. Those financing mechanisms are secured either as liens on the property or as contracts that affect title and payments.

It makes sense to pursue refinancing in these situations:

  • Your mortgage interest rate is significantly higher than current market rates.
  • You want to convert high-interest debt into lower-rate mortgage debt or consolidate monthly payments.
  • You need to change the loan term (shorten to pay off faster or extend to reduce payments).
  • You want to take cash out for home improvements, but you must understand how subordinate energy liens affect eligibility.

Benefits and drawbacks

Benefits

  • Lower monthly mortgage payment or interest rate.
  • Opportunity to consolidate debt, possibly replacing separate solar loan payments with a single mortgage payment (if you pay off the solar loan).
  • Potential to refinance into a loan that accommodates the solar or PACE lien (with lender approval).

Drawbacks

  • Extra complexity and paperwork. Lenders and title companies will scrutinize subordinate liens or property assessments.
  • Some lenders or loan programs may refuse to refinance until PACE liens are paid or subordinated, or they may not allow cash-out refinancing.
  • Fees for subordination or payoff, and possible prepayment penalties on the solar financing.

Costs and fees to expect

Refinancing with solar or PACE can add specific costs on top of normal refinance closing costs. Typical items include:

  • Payoff amount for solar loan or assumption fee for a lease/PPA if the servicer requires it.
  • Subordination fees: some solar lenders or PACE administrators charge a fee to subordinate their lien to the new mortgage.
  • Title and recording fees to document lien changes or releases.
  • Possible increased interest rate or denial of cash-out options if a subordinate lien remains.
  • Prepayment penalties: check solar loan or PACE contract terms for penalties on early payoff.

Step-by-step process

Use this roadmap to prepare and move through a refinance when solar or PACE liens are present:

1. Gather documents

  • Mortgage payoff statement, current deed, title report.
  • Solar financing documents: loan agreements, lease or PPA, payoff instructions, account statements.
  • PACE assessment details: special tax bill terms, payment schedule, administrator contact info.

2. Talk to prospective lenders early

Disclose solar loans, leases/PPAs, or PACE assessments when you apply. Ask whether the lender will permit refinancing with each type of obligation in place, and whether a subordination agreement or payoff is required for approval or for cash-out.

3. Contact your solar servicer or PACE administrator

Ask about payoff amounts, conditions for subordination, assumption options, and any fees. For leases/PPAs ask if the contract can be transferred or terminated and what costs or penalties apply.

4. Coordinate with the title company and lender

Title must reflect the new mortgage priority. If a subordination agreement is needed, obtain the document in time for closing so the title company can clear exceptions.

5. Close the refinance

At closing, ensure the new lender funds the mortgage and that payoffs or subordination documents are executed and recorded. Confirm the solar or PACE payments remain arranged correctly after closing.

6. Confirm post-close recording and statements

Verify the title records show the correct priority and that you receive final statements confirming payoff or continued payment instructions for any remaining obligations.

Common pitfalls to avoid

  • Assuming any lender will refinance with a PACE lien: many lenders are cautious or restrictive because PACE obligations are assessed with tax-like priority in some jurisdictions.
  • Overlooking solar lease/PPA transfer limitations: these contracts often tie to the seller or require buyer consent; refinancing doesn’t automatically transfer the contract.
  • Not verifying subordination terms or fees early: waiting until underwriting can delay or derail closing if a servicer refuses to subordinate or wants high fees.
  • Requesting cash-out refinancing without confirming whether subordinate liens will be allowed; cash-out may be denied or require payoff.
  • Missing prepayment penalties on solar loans or exit fees on leases/PPAs.

Short FAQ

Can I refinance if I have a PACE assessment on my property?

Maybe. Some lenders allow refinancing with PACE assessments if conditions are met; others require the assessment be paid off or subordinated. Policies vary by lender, loan program, and state. Check early with your lender and the PACE administrator.

What if my solar system is leased or under a PPA?

Leases and PPAs are contractual and often require servicer consent to transfer. Many servicers do not allow refinancing to pay for or assume those contracts; you may need to refinance around the contract or negotiate assumption/termination with the provider.

Will subordination cost a lot?

Subordination fees vary. Some servicers charge nominal administrative fees; others may charge several hundred dollars. Factor in title and recording costs as well. Always request a written fee schedule and timeline.

How long does it take to refinance with these liens?

Expect a longer timeline than a standard refinance. Allow extra time for payoff or subordination negotiations—sometimes several weeks—on top of normal underwriting and closing schedules.

Refinancing a mortgage when your home has solar financing or a PACE lien is feasible in many cases, but it requires upfront disclosure, close coordination among lender, title company, and the solar or PACE provider, and careful review of fees and contract terms. Start early, get written commitments, and consider professional advice if your situation is complex.

META: refinancing, solar loan, PACE lien, mortgage refinance, subordination, solar lease, home equity, refinance costs

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