What to Know About Refinancing Your Home with Solar

Solar isn't a headache when your plans change.

Picture of page author Alex Kelleher.

by Alex Kelleher
5 min read - Published on 05/10/2022

When you buy a home, you’re making a big investment. Chances are you’re going to own your home for more than a decade. However, we know that life rarely goes according to plan, leading to renting, refinancing, or even selling your home earlier than you anticipated. 

It’s normal for things like this to come up. Life is often unpredictable and unexpected, which is why we want to provide you with resources that make these transitions easier when you have solar. If you find yourself needing to refinance your home with solar, don’t stress—Lumio will work with you through the entire process.
Whether you’re about to refinance your home with solar panels or curious about it for the future, we've got you covered! 

If you choose to refinance your home at any point during the course of your solar loan agreement or lease, you can count on Lumio to help you through it. The addition of a solar loan or lease does add an extra step to the refinance process, but with a little planning, it won't be an issue for you.

The Refinancing Process with Solar

When you own a home with a solar panel system installed, you’ll need to take a little bit of extra time to plan ahead before refinancing your home. There are just a few additional steps you’ll need to take so that your refinancing process can go smoothly. The first step is to go back through your paperwork and see how your panels were initially purchased. Depending on the financing option you used to switch to solar, you may need to work with your solar company to temporarily lift any liens that apply to your system.

Once you have that information, you’ll visit with your chosen lender and they will help you through the refinancing process specific to your situation.

Lift any Equipment Liens

The second step to refinancing your home with solar panels is to temporarily lift any liens that may apply to your system. These liens will remain on your solar panel system until the loan used to purchase them is paid off.

Luckily, your panel’s manufacturer will have all the appropriate resources for homeowners looking to refinance. If you’ve purchased solar panels through Lumio, you can simply give us a call and we will have all the necessary information you need in order to lift any potential liens that are in place on your solar panels.

Work with Your Lender to Refinance

Once you’ve gathered information about how your solar panels were purchased and contacted your panel manufacturer to get information on how to lift the liens in place on your system, you will be able to chat with your preferred lender to discuss your options in refinancing your home.

It’s important to provide your lender with information about your home’s solar panels so that the refinancing process can go smoothly. Following these simple steps can help you get the new financing on your home that you’ve needed!

As mentioned before, the refinancing process looks a little different depending on how your solar panels were purchased. The process can have fewer steps if you’ve paid for your panels in cash, and there may be more steps to go through if you’ve leased your solar panels. Now, let’s discuss how different buying options can affect the process of refinancing your home.

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Refinancing Solar Panels Purchased with Cash

Though not many people have the means to do this, some homeowners are able to purchase their solar panel system completely in cash. Because they are the full owners of the system, the refinancing process becomes much easier. Your lender will most likely treat your solar panels as a general upgrade to the home, giving it a higher valuation, helping you get better loan terms when you refinance.

Refinancing with a Solar Loan

Many homeowners decide to purchase their solar panel system by utilizing a solar loan. In order to ensure the lender’s safety, they’ll likely place a lien on your panel system to protect in case the homeowner stops making payments on their loan.

We’ll dive more into depth about what this equipment lien entails below, but know that it doesn’t affect your ability to refinance. It simply gives you an extra step to work through. When you’ve purchased your solar panels with a loan, you’ll need to work with your solar loan lender to temporarily lift the lien before proceeding with refinancing with your chosen lender.

You may also choose to pay off the balance of the loan, which eliminates any existing liens and will make the refinancing process even simpler.

Refinancing with a Solar Lease

Opting to lease solar panels with a power purchase agreement (PPA) for your home is a great option for many in states where it's offered. While it provides environmental benefits, no upfront costs, and cheaper power, it can make the refinancing process a bit more difficult than other financing options.

Don't stress—you are still able to refinance your home with a solar PPA. Proactively gather all information about your lease terms to bring to your meeting with your refinancing lender. Each lender is a little different and may require different additional steps to your refinancing process. Staying on top of the required steps and information can make your refinancing a little more difficult, but still manageable and attainable.

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Common Questions Asked by Homeowners

We’ve covered a lot of information, but chances are that you still have some questions. Let’s dive in to some common questions that homeowners ask concerning solar panel systems and the refinancing process. We’ll cover equipment liens, DTI, solar as a sole source of electricity, and wrap up exactly what you need to do in order to refinance your home.

What is an equipment lien?

An equipment lien is pretty much exactly what it sounds like—it’s a lien on the solar panel equipment on your home. A lien is a legal claim that a lender has on an asset of the borrower. These are put in place in case the borrower defaults on payments, or if the borrower attempts to sell the asset before it is paid off. When you purchased solar panels utilizing a loan, your lender likely placed an equipment lien on your panels, and in order to refinance your home, that lien will need to be temporarily lifted.

What is Debt-to-Income (DTI) Ratio?

In order to prepare for refinancing, your lender will help you calculate your debt-to-income ratio (DTI). This allows the lender to determine the size of mortgage you qualify for. If you have a solar loan, or if you lease your solar panels, those monthly payments will factor into your DTI and influence your refinancing terms and eligibility. This is important information to know when you begin the process of refinancing your home with a solar panel system.

Is solar power your sole source of electricity?

Another thing you’ll need to consider when looking to refinance is whether or not solar panels are your home’s sole source of electricity.

For most residential homes with solar panels, this likely won’t be an issue as your home is probably still connected to the grid. However, remote homes or cabins that rely solely on solar panels and battery storage for electricity will potentially run into some roadblocks when it comes to refinancing. Your lender will help determine your home’s eligibility for refinancing if this is an issue.

What does the homeowner need to do when preparing to refinance?

When you are planning to refinance your home with solar panels, you will first need to determine how your panels were purchased. Bring any information about lease terms with you when you meet with your lender and be prepared to share information about how you purchased your solar panels.

If any equipment liens are in place on your system, you’ll need to temporarily lift those liens in order to refinance. Work with your preferred lender to begin the process of refinancing your home and provide them with any information they need.

Final thoughts...

It may feel daunting when you decide to refinance your home, especially if you have solar panels. You don’t need to stress about the process—Lumio does this all the time. We will work with you to lift any equipment liens as you establish your refinance terms. Having a solar panel system on your home is beneficial to your budget and provides benefits to the environment, it doesn't need to be a headache during your refinancing process.

If you are currently planning to refinance, Lumio will work with you to ensure that it is a smooth process. If you’re interested in installing solar panels, but you’re curious about how the panels can affect your eligibility for refinancing in the future, there’s no need to worry! Lumio will help you through the process and answer all of your questions along the way. Refinancing your home with a solar lease or loan comes with a few extra steps, but the process can be made easy with a little preparation and planning ahead!

Make power personal by taking advantage of the value of solar. Contact Lumio today.