Many homes across New Mexico have installed solar panels on the roof or around the home to take advantage of our abundant sunshine. However, homeowners may not realize the impact solar panels will have when they want to sell the property or refinance their mortgage. If the solar equipment is still financed or is leased from a solar company, they impact the home’s title.
The loan taken out to purchase solar panels is considered a second mortgage. If the homeowners later want to refinance their home loan, that second mortgage will affect the amount of equity available. It is considered the same as a home equity loan and is deducted from the equity.
If the homeowner is leasing the panels instead or has a power purchase agreement (PPA), they don’t own the panels so that can also complicate selling the home. Solar companies will tell consumers it’s not technically a lien but rather is called a UCC-1; if the homeowner fails to keep up with payments on the leased panels, that document allows the solar company to repossess the solar equipment. To mortgage lenders, that type of lease is considered a lien since it shows up on the title as a second lien. Even if borrowers are not taking any cash out of a ReFi and just want to obtain a lower interest rate and payment, it will affect the rate on that refinance since it’s considered higher risk to refinance with a second lien in place.
Many times, solar companies are willing to release that lien long enough to complete the refinance, and most lenders will actually work with the solar companies to get this accomplished.
The important thing is to make sure you tell your lender about any solar panels on your property.