What is a PACE lien?
PACE stands for Property Assessed Clean Energy. It pays for home improvements such as solar panels, heat pumps or new windows, and you repay it as an assessment on your property tax bill rather than as a separate loan payment. The assessment stays attached to the property, not to you.
Since March 1, 2026, a federal rule (opens in a new tab) treats residential PACE as credit under the Truth in Lending Act. PACE providers now have to check that you can afford the payments before they lend, according to the CFPB's summary (opens in a new tab).
Why does PACE get in the way of a refinance?
Because a PACE assessment is collected like a property tax, it typically gets paid ahead of your mortgage if a home is sold in foreclosure. Fannie Mae won't buy a loan on a home with an outstanding PACE loan that has that priority, so a conventional refinance usually has to pay it off.
That's Fannie Mae's PACE policy (opens in a new tab). Its property rules (opens in a new tab) say the same about solar: panels financed through PACE make the home ineligible unless the PACE balance is paid in full before or at closing.
Freddie Mac, FHA and VA each have their own PACE rules. Tell your loan officer about the assessment at the start, so you know which programs can work before you pay for an appraisal.
How do I pay off PACE when I refinance?
Ask the PACE administrator for a written payoff amount, then give it to your loan officer. If you have enough equity, the refinance can pay off the PACE balance at closing, just as it pays off your mortgage, and the assessment should come off your next property tax bill.
- Find the assessment on your county property tax bill — it's usually a separate line with the PACE program's name.
- Ask the PACE administrator for a written payoff amount, good through your expected closing date, and whether there's any charge for paying early.
- Share the payoff with your loan officer. With enough equity, the refinance can pay it off at closing, the same way it pays off your current mortgage.
- Make sure the payoff is recorded and the assessment comes off your next tax bill.
If you're borrowing more than you owe on your mortgage to cover the PACE payoff, ask how the loan will be classified — that can affect which programs and terms fit. Your Loan Estimate will show the payoff and every closing cost.
What if my solar isn't PACE?
Leased solar, power-purchase agreements and ordinary solar loans aren't collected through your property tax bill, so they're handled differently from PACE. Bring the contract to your loan officer early: the lender needs to see who owns the panels and whether anything is recorded against your home.
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