Quick Answer
Owned solar panels (purchased outright, not financed through PACE) do not create any HECM eligibility issue and may add to the appraised value — while PACE-financed solar creates a super-priority lien that must be paid off at closing before the HECM can proceed.
- Owned solar (cash or personal loan): no issue — may add value to appraisal.
- PACE-financed solar: super-priority lien must be paid off at HECM closing.
- Solar lease: requires solar company's subordination or consent agreement.
- Solar PPA: same as lease — company consent required.
- PACE payoff takes 2 to 3 weeks — request at start of process.
- In California, PACE solar is extremely common — Jay asks about solar in every consultation.
Key Facts
| Topic | Key Fact |
|---|---|
| Owned solar (no PACE) | No lien issue — treated as property improvement in appraisal |
| PACE solar lien priority | Super-priority under California law — above all mortgage liens |
| PACE payoff requirement | Must be paid before HECM closing |
| PACE payoff timeline | 2 to 3 weeks for payoff statement |
| Solar lease | Company owns panels — requires subordination or consent |
| Solar PPA | Same as lease — company consent required for HECM |
| Common CA PACE programs | Ygrene, HERO Program, CalFirst Financing |
| PACE source | Property tax bill — special assessment |
Detailed Explanation
California's solar panel market encompasses three distinct ownership structures that have dramatically different implications for HECM financing. Understanding which structure applies to any given California home is one of the first questions Jay asks in every consultation — because the answer determines whether the transaction has a simple path or requires weeks of additional coordination.
Owned solar systems — purchased with cash or a personal installment loan not secured by the property — have no impact on HECM eligibility. They do not create a lien on the property. They may add to the appraised value (appraisers increasingly account for solar systems' energy savings in their comparable analysis in California markets where solar is common). From a HECM processing standpoint, owned solar is noted in the appraisal and the transaction proceeds normally.
PACE (Property Assessed Clean Energy) financing creates the most complex situation. PACE programs — including Ygrene Energy Fund, HERO Program, and CalFirst Financing — provide financing for solar and energy improvements through a special property tax assessment. This assessment creates a lien that, under California law, has super-priority over all mortgage liens — including the future HECM. The HECM cannot close with an unresolved PACE lien having priority. The PACE balance must be paid off entirely and the lien released before the HECM can record in first lien position.
Solar leases and Power Purchase Agreements (PPAs) present a different structure. The solar company owns the panels installed on the borrower's roof under a long-term agreement (typically 20 to 25 years). The HECM lender requires either a subordination of the solar company's interest (agreeing to be subordinate to the HECM lien) or a consent agreement confirming the lender's rights take priority. Most solar companies accommodate HECM refinances through an established process, though it adds 2 to 4 weeks to the timeline.
Jay Zayer, CRMP — 18 Years Experience
My first three questions in every California consultation are: what is your age, what is your home value, and do you have solar panels — and if yes, how are they financed? The answer to the solar question determines whether I immediately initiate a PACE payoff request process or proceed with the standard timeline. A PACE lien discovered at the title examination rather than in the first consultation adds 2 to 3 weeks to a transaction that is already constrained by California's cooling-off period.
Who This Is Right For
This may be a good fit if:
- You have solar panels on your California home and want to understand how they affect the reverse mortgage process
This may NOT be the right fit if:
- There is no situation where understanding the solar panel structure would be inappropriate — it is one of the most common California-specific complications
Common Misconception
Myth: Solar panels prevent a reverse mortgage.
Fact: Owned solar panels have no impact on HECM eligibility and may add appraisal value. PACE-financed solar requires a payoff but does not prevent the HECM — it is addressed at closing.
Source: California PACE law; HUD HECM lien position requirements
Authoritative Sources
- California PACE law — calepa.ca.gov
- Ygrene: PACE payoff — ygrene.com
- HUD: HECM first lien requirements — hud.gov
People Also Ask
How do I know if my solar panels are PACE-financed?
Check your property tax bill. PACE financing appears as a special assessment on the property tax bill rather than as a separate loan payment. Contact your utility or the solar company for documentation.
How long does it take to pay off a PACE lien for a reverse mortgage?
Approximately 2 to 3 weeks for the PACE program administrator to issue a payoff statement and process the payoff. Start this process in week 1 of the reverse mortgage application.
Can I keep my solar panels after getting a reverse mortgage?
Yes — owned solar panels remain yours throughout the reverse mortgage's life. For PACE payoffs, the panels remain installed but the PACE financing obligation is retired at closing.