Can Adding Solar Prevent You From Refinancing or Selling?

“PACE”, a property assessed clean energy financing program.

Thinking about putting solar panels on your home?  Be careful how you finance your new addition.  The wrong type of financing may prevent your ability to refinance or sell.  A new financing option available in California will allow you to qualify because of liens placed through property tax assessments. Basically, it’s a way to finance solar systems or energy efficiency retrofits, where the city offers you a loan, and you pay it back through your property tax bills over 15 to 20 years. This program is called PACE.

However, a homeowner with a first-lien PACE program cannot refinance their existing mortgage with a Fannie Mae or Freddie Mac mortgage.  Fannie and Freddie make up 90% of all loans done today. The PACE loan offered in California and in some other states is a first-lien advanced to “super-priority” status over Fannie Mae and Freddie Mac first-lien mortgages.

According to the December 2014 report from the Federal Housing Finance Agency, super-priority liens through certain energy retrofit financing programs structured as tax assessments threaten the first-lien status of single-family loans owned or guaranteed by Fannie Mae and Freddie Mac. Anyone wanting to buy a home that already has a first-lien PACE loan cannot use a Fannie Mae or Freddie Mac loan for the purchase.  The FHFA statement declares that “Localities offering these PACE loans threaten to move existing Fannie Mae and Freddie Mac mortgages to a second lien position and increase the risk of loss to the Enterprises and, by extension, to taxpayers.”

These restrictions may reduce the marketability of the house or require the homeowner to pay off the PACE loan before selling the house.

We suggest you learn the details of financing options and do your homework!  We love energy savings – we love solar and wanted to keep you aware of the best case financing.

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