Quick Answer
Homes with solar panels can qualify for a reverse mortgage — but the financing structure for the solar panels matters significantly, because solar loans or PACE financing that create liens on the property must be paid off or handled before the HECM can close in first lien position.
- Solar panels on the home do not affect HECM eligibility if the system is fully owned.
- Solar loans and PACE liens must be paid off or handled before the HECM can close.
- PACE (Property Assessed Clean Energy) financing creates a tax lien that typically has priority over the HECM.
- Leased solar systems require assignment or termination — the leasing company must consent.
- Owned solar panels are treated as a permanent fixture and improve the home's value in the appraisal.
- Jay checks solar financing type in the first consultation for every California solar home.
Key Facts
| Topic | Key Fact |
|---|---|
| Fully owned solar panels | No issue — treated as property improvement, valued in appraisal |
| Solar loan (personal loan) | Check lien status — if recorded, must be addressed before HECM closing |
| PACE financing | Creates property tax lien — typically has priority and must be paid before HECM |
| Solar lease | Requires consent of leasing company — assignment of lease or termination needed |
| Solar PPA (power purchase agreement) | Similar to lease — company consent required |
| PACE payoff timing | Same as CalHFA — request payoff statement early in process |
| California PACE prevalence | Very common in San Diego County — most commonly through Ygrene, HERO, CalFirst programs |
| Appraisal treatment | Owned solar adds value to home — appraiser factors into comparable adjustments |
Detailed Explanation
Solar panels are common in California — particularly in San Diego County, where the combination of high electricity rates and abundant sunshine makes solar a compelling investment. Whether solar panels affect a reverse mortgage depends entirely on how the solar system was financed. Fully owned systems (purchased outright or with a personal loan that is not secured by the property) have no effect on the HECM other than potentially increasing the home's appraised value. Financed systems with property liens require specific attention.
PACE (Property Assessed Clean Energy) financing is the most common solar financing structure that creates HECM complications. PACE allows homeowners to finance solar, energy efficiency, and other property improvements through a special tax assessment added to the property tax bill. This assessment creates a lien that — in California — has priority over all other liens including mortgages. Because the HECM requires first lien position, and PACE financing has legal priority over the HECM, the PACE balance must be paid off before the HECM can close. PACE payoff requests typically take 2 to 3 weeks, similar to CalHFA payoff requests.
Leased solar systems and Power Purchase Agreements (PPAs) create contractual relationships between the homeowner and the solar company rather than liens. The homeowner does not own the panels — the solar company does. When the home is sold or refinanced, the solar company's consent is required to assign the lease to the new owner (in a sale) or to confirm that the lease is subordinate to the new mortgage (in a refinance). Most solar companies accommodate HECM refinances with a signed subordination agreement. The process takes 2 to 4 weeks in most cases.
Owned solar systems — purchased outright or with a personal unsecured loan — have no lien on the property and no third-party consent requirements. The panels are treated as a permanent fixture in the appraisal, and their value is factored into the home's appraisal if comparable sales in the area reflect solar's value premium. In San Diego's market, owned solar systems may add $10,000 to $25,000 to the appraised value depending on system size and age.
Jay Zayer, CRMP — 18 Years Experience
The solar conversation in San Diego goes like this: 'Do you have solar panels?' Most clients in North County say yes. 'How are they financed?' Fifty percent say they own them or have a loan through the installer. That usually means no issue. The other fifty percent say they have PACE through Ygrene or HERO. That means we need a payoff statement immediately and we need to factor the payoff amount into the net proceeds calculation. The payoff amounts are often $12,000 to $35,000 — significant enough to meaningfully affect net proceeds for some clients.
Who This Is Right For
This may be a good fit if:
- You have solar panels on your home and want to understand how the financing structure affects the reverse mortgage process
This may NOT be the right fit if:
- There is no situation where understanding the solar financing impact would be inappropriate — it affects a significant percentage of California reverse mortgage applicants
Common Misconception
Myth: Solar panels on your home prevent you from getting a reverse mortgage.
Fact: Owned solar panels do not prevent a HECM. Leased systems require the leasing company's consent. PACE-financed systems must be paid off before closing. None of these situations are an absolute bar to a reverse mortgage — they simply require additional steps.
Source: HUD HECM program guidelines; California PACE program regulations
Authoritative Sources
- California PACE programs — calepa.ca.gov
- HUD: HECM lien requirements — hud.gov
- Solar Energy Industries Association: Financing options — seia.org
People Also Ask
Do solar panels increase my home's appraised value for a reverse mortgage?
Owned solar panels may increase the appraised value, particularly in California markets where solar is common and buyers factor it into purchase decisions. Leased panels typically do not add appraised value since the buyer cannot own them.
I have PACE solar financing — do I have to pay it off for a reverse mortgage?
Yes — PACE financing creates a property tax lien that has priority over the HECM. The PACE balance must be paid off before the HECM can close. Request the payoff statement early in the process — it typically takes 2 to 3 weeks.
I lease my solar panels — can I still get a reverse mortgage?
Yes — most solar leasing companies will execute a subordination agreement or consent to the HECM refinance. Contact your solar company and Jay simultaneously to coordinate the process.