Getting a HELOC with a Solar Panel Lien

Solar panels add value to your home and [reduce energy costs](/blog/energy-efficient-home-upgrades), but the financing you used to install them can complicate obtaining a [home equity line of credit](/blog/best-heloc-lenders-2026). Whether you purchased your solar system with a loan, lease, or power purchase agreement (PPA), that existing encumbrance affects your ability to [access home equity](/blog/tappable-equity-explained) through a HELOC.

Understanding the relationship between solar financing and HELOCs is essential for maximizing both clean energy and home equity benefits.

Types of Solar Financing and Their Impact

Not all solar financing creates the same obstacles for HELOC approval. The impact depends on how your solar system is financed.

Solar Loans with UCC-1 Liens

Most solar loans are secured by a UCC-1 filing (Uniform Commercial Code filing) against the solar equipment itself, not your home. This is a personal property lien similar to an auto loan—it secures the solar panels as collateral but doesn't directly encumber your real estate.

HELOC impact: Minimal to moderate. Because UCC-1 liens attach to the equipment rather than the property, many HELOC lenders will approve applications with solar loans in place. However, the monthly solar payment affects your [debt-to-income ratio](/blog/dti-ratio-explained).

Solar Loans with Mortgage Liens

Some solar financing companies file liens as mortgages or deeds of trust against your property, giving them a security interest in your home itself, not just the equipment.

HELOC impact: Significant. This creates a subordinate lien that a HELOC lender must account for in their combined loan-to-value calculations. Some lenders may decline to offer a HELOC if a solar mortgage lien is in place, while others will reduce the available credit line.

PACE Loans (Property Assessed Clean Energy)

PACE loans for solar installations are repaid through property tax assessments and typically have super-priority lien status, meaning they're senior even to your first mortgage.

HELOC impact: Severe. Most HELOC lenders are extremely reluctant to lend on properties with PACE liens due to their priority status. You may need to pay off the PACE loan before qualifying for a HELOC.

Solar Leases and PPAs

Solar leases and power purchase agreements mean you don't own the panels—a third party owns them and leases them to you or sells you the power they generate. These typically don't create liens against your property.

HELOC impact: Minimal from a lien perspective, but the monthly lease or PPA payment still affects your DTI. Additionally, some lenders view leases unfavorably because they represent a long-term obligation that stays with the property.

How HELOC Lenders Evaluate Properties with Solar Liens

When you apply for a HELOC with solar financing in place, lenders conduct additional due diligence.

Lien Priority and Position

HELOC lenders want to understand where they stand in the lien hierarchy:

1. Property taxes (always first priority)
2. PACE liens (if applicable—often priority position)
3. First mortgage
4. Solar mortgage lien (if applicable)
5. Proposed HELOC
6. UCC-1 lien on solar equipment (personal property, not real estate)

The HELOC lender's position affects their risk and willingness to lend. Most conventional HELOC lenders prefer to be in second position behind only the first mortgage.

Combined Loan-to-Value (CLTV) Calculation

HELOC lenders calculate CLTV by adding all liens secured by the property:

Example:

• [Home value](/blog/appraisal-process-explained): $500,000
• First mortgage balance: $300,000
• Solar loan with mortgage lien: $25,000
• Proposed HELOC: $50,000
• CLTV: ($300,000 + $25,000 + $50,000) / $500,000 = 75%

Most HELOC lenders limit CLTV to 80-90%, so solar mortgage liens reduce available HELOC credit.

If your solar loan is secured only by a UCC-1 lien (not a mortgage lien), most lenders won't include it in CLTV calculations—though the payment still affects DTI.

Debt-to-Income Impact

Regardless of lien type, your solar payment counts toward your monthly debt obligations. Typical solar loans range from $100-$400 monthly, which can reduce your borrowing capacity or even disqualify you if your DTI is borderline.

Appraisal Considerations

Owned solar systems (not leased) generally increase home value by $15,000-$30,000 depending on system size, quality, and local market conditions. However, appraisers may discount this value if:

• The solar loan balance exceeds the value added
• The panels are old or outdated
• Local buyers show limited interest in solar homes

Leased systems typically add no appraisal value since the homeowner doesn't own the equipment.

Strategies to Get Approved with Solar Financing

1. Verify Your Solar Lien Type

Request documentation from your solar company showing:

• Whether a UCC-1 filing or mortgage lien was recorded
• The exact language and terms of the security interest
• Current loan balance and payment amount

This information helps you and your HELOC lender understand the impact on your application.

2. Choose HELOC Lenders Familiar with Solar

Not all lenders have experience with solar-financed homes. Seek out:

• Credit unions in solar-friendly states (California, Arizona, Texas, Florida)
• Regional banks in areas with high solar adoption
• Online lenders who specialize in unique property situations

These lenders have established policies for handling solar liens and won't automatically decline your application.

3. Request Subordination Agreements

If your solar lien is recorded as a mortgage, you may need the solar lender to subordinate their lien to the proposed HELOC. This moves the HELOC into a higher priority position, making HELOC lenders more comfortable.

Process:

1. Request subordination from your solar lender
2. Expect to pay a fee ($100-$500)
3. Provide documentation to your HELOC lender

Many solar companies routinely grant subordination for HELOCs and refinances.

4. Pay Down or Pay Off the Solar Loan

If your solar loan has a mortgage lien that's blocking HELOC approval:

• Consider paying it off entirely if the balance is low
• Make extra principal payments to reduce the balance and improve your CLTV
• Refinance the solar loan to a personal loan (unsecured), removing the lien

5. Maximize Your Home Equity

Improve your equity position to offset the solar lien:

• Make extra mortgage principal payments
• Wait for home appreciation
• Complete value-adding improvements

The more equity you have, the less impact the solar lien has on your HELOC availability.

6. Improve Your DTI

Since solar payments affect DTI:

• Pay off other debts (credit cards, auto loans)
• Increase your income (side gigs, raises, bonuses)
• Consider a co-borrower with income who can strengthen the application

7. Consider Alternative Solar Arrangements

If you're planning solar installation and want to preserve HELOC access:

Cash purchase: No lien, no ongoing payments. Use a HELOC to finance the solar installation itself if you have sufficient equity.

Unsecured solar loan: Some lenders offer unsecured solar loans without liens. These have higher rates but don't encumber your property.

Smaller system: Reduce the solar loan amount to minimize DTI impact and lien size.

PACE Loans: Special Challenges

PACE financing deserves special attention due to its super-priority status. If you have a PACE loan for solar:

Why HELOC Lenders Are Reluctant

PACE liens are senior to the first mortgage, meaning in foreclosure, the PACE lender gets paid before anyone else. This creates unacceptable risk for HELOC lenders who would be in third or fourth position.

Your Options

Pay off the PACE loan: This is often the only way to qualify for a HELOC. Consider:

• Using savings
• Refinancing to a [conventional mortgage](/blog/conventional-loan-requirements) with cash-out to cover the PACE balance
• Taking a personal loan to pay off PACE (if mathematically beneficial)

Wait for PACE payoff: If you're near the end of your PACE term, waiting until it's paid off may be practical.

Accept limited HELOC options: A few specialized lenders may offer HELOCs with PACE liens in place, but expect very low credit lines and high rates.

Leased Solar Systems and HELOCs

Solar leases don't create liens, but they create different complications:

Transferability Issues

Most solar leases require new homeowners to assume the lease or require the seller to buy out the lease. HELOC lenders worry that leased solar reduces marketability, affecting the home's value in foreclosure.

Lender Concerns

• Long-term obligations: 20-25 year leases represent long-term commitments that transfer with the property
• Buyout costs: If foreclosure occurs, the lender may need to buy out the lease
• Marketability: Some buyers avoid homes with solar leases

Improving Approval Chances

• Provide the solar lease agreement to your HELOC lender for review
• Demonstrate the lease is transferable with reasonable terms
• Show that the lease payment is manageable within your DTI
• Consider leases from well-known, financially stable solar companies (Tesla, Sunrun, Vivint)

Owned vs. Leased: Which is Better for HELOC Access?

Owned solar (even with liens) is generally better for HELOC access because:

• It adds appraisal value to your home
• Liens can often be subordinated
• Once the loan is paid off, the obstacle disappears
• You control the system and can remove it if needed

Leased solar offers no equity benefit and creates a long-term obligation, though it avoids liens that directly reduce HELOC availability.

Recommendation: If you plan to access home equity regularly, purchasing solar with a UCC-1 secured loan is the best approach.

When to Address Solar Before Applying for a HELOC

Consider resolving solar financing issues before applying for a HELOC if:

• Your solar loan is nearly paid off (within 12-24 months)
• Your CLTV would exceed 85% with both the solar lien and HELOC
• You have a PACE loan that's blocking approval
• Your DTI is borderline, and eliminating the solar payment would help

In these cases, paying off or restructuring solar financing before applying can improve your approval odds and increase your credit line.

Frequently Asked Questions

Will solar panels increase my home's value for HELOC purposes?

Owned solar systems typically add $15,000-$30,000 in appraised value, depending on system size and local market conditions. Leased systems generally add no value since you don't own the equipment.

Do all HELOC lenders treat solar liens the same way?

No. Lenders in solar-friendly states (California, Arizona, Nevada) are more experienced with solar financing and often have more accommodating policies. Local credit unions and regional banks may be more flexible than large national lenders.

Can I use a HELOC to pay off my solar loan?

Yes. If you have sufficient equity, you can use HELOC proceeds to pay off your solar loan, removing the lien and potentially reducing your interest rate if the HELOC rate is lower than your solar loan rate.

What's the difference between a UCC-1 lien and a mortgage lien for solar?

A UCC-1 lien attaches to the solar equipment (personal property) and doesn't directly encumber your real estate. A mortgage lien attaches to your property itself, affecting your home's title and HELOC calculations.

Will paying off my solar loan improve my HELOC approval chances?

Yes, in multiple ways: it eliminates any lien concerns, improves your DTI by removing the monthly payment, and demonstrates financial capacity. If your solar balance is low, paying it off before applying for a HELOC can be strategic.

Can I get a HELOC with a PACE solar loan?

It's very difficult. Most HELOC lenders refuse to lend on properties with PACE liens due to their super-priority status. Your best option is paying off the PACE loan first.

Should I get solar before or after applying for a HELOC?

If you plan to purchase solar with cash or a minimal loan, timing doesn't matter much. If you need significant solar financing, get the HELOC first, then use HELOC funds to purchase solar if desired—this avoids lien complications.

How do I find out if my solar loan is a UCC-1 or mortgage lien?

Check your solar loan documents for recording information. UCC-1 filings are recorded with the Secretary of State; mortgage liens are recorded with the county recorder. You can also contact your solar lender directly to ask how the loan is secured.

Related Articles

• [[Home [Equity Explained](/blog/home-equity-explained)](/blog/what-is-home-equity): What It Is and How to Build It](/blog/home-equity-explained)
• Property Taxes Explained: How They Work and How to Reduce Them
• Blended Family Home Planning: Merging Households and Managing Home Equity