Solar Loan & PACE
Real Estate / CashflowA solar loan finances the installation of solar panels. How it’s structured determines whether it becomes your problem when you buy the house:
- Owned outright — the panels are paid off and convey with the home. Cleanest case.
- Solar loan (equipment-secured) — a personal/installment loan, often with a UCC-1 filing on the panels. It must be paid off, transferred, or assumed at closing.
- Lease or PPA (power purchase agreement) — the homeowner doesn’t own the panels; they pay a monthly amount. A buyer usually has to assume the lease/PPA or force the seller to buy it out.
- PACE (Property Assessed Clean Energy) — the financing is repaid as an add-on to the property tax bill, which creates a lien that is typically senior to the mortgage and stays with the property, transferring to the new owner unless paid off.
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A surprise solar lien can kill a closing. PACE especially: most conventional and government lenders require it to be paid off at or before closing because it primes the mortgage. On a subject-to or seller-finance deal, a PACE assessment keeps accruing on the tax bill you now control. Always pull the payoff, confirm the lien type and balance, and verify transferability before you commit.
This is general information, not legal or tax advice; rules and programs vary by state and lender. For where it bites hardest, see subject-to and the fix-and-flip playbook.