Selling a home can be a complicated process. Between scheduling showings, trying to get the best sale price, handling any costly repairs and improvements, and the often-emotional process of moving, it’s a lot to deal with. The last thing you want is a call from your buyer’s mortgage lender saying they can’t proceed because they believe there’s a lien on your property—and it’s related to the loan you took out to install your solar panels.
Though unfortunate, this is a common misunderstanding made by mortgage lenders who lack experience with solar loans. Thankfully, with a bit of education, it’s easy to clear up so you can proceed with the sale of your home.
Liens on Your Home vs Liens on Your Solar Assets
A lien is a legal claim that a lender has on an asset which can be executed if a borrower defaults on payments or tries to sell the asset before it’s fully paid off. So just like a mortgage lender has a lien on your house (e.g., a mortgage or deed of trust) and an auto lender has a lien on your car, solar lenders like Mosaic have a lien on your solar equipment (including your solar panels, wiring, inverter, and battery system, if applicable). And just like that house or car, the lien on solar equipment, meaning the claim on the asset, remains in place until the loan is paid off.
When selling your home, there are two ways to deal with the solar lien: either the new homeowners need to first qualify for and then assume the loan and the lien along with it, or you (the seller) need to simply pay off the balance of the loan, such as with proceeds from your home sale, which will trigger the release of the lien. Your solar panels likely increased your home sale price due to the added value of your solar system, and using that value to pay off the solar loan in escrow is usually the easiest option. This option also avoids the risk of the homebuyer failing to qualify for the solar loan assumption, which happens in some circumstances.
That’s the short version, and if that seems straightforward, you’re right — it is! So why is this a source of confusion for some mortgage lenders?
Due to the amount of questions we receive about this, Mosaic has enlisted the help of Greg Field, an experienced Solar Home Realtor in Phoenix, AZ to explain why this might occur.
The Source of Confusion on Solar Loan Liens: The UCC-1 Filing
Featuring guest contributor Greg Field, Solar Home Realtor*
As a homeowner, you authorized a Uniform Commercial Code-1 (UCC-1) filing when you received a loan to add solar panels to your home. To file the agreement, the authorized UCC-1 is filed with the Secretary of State (SOS) and the county where your solar home is located. The filing is public and can be viewed online on your SOS and county’s website, allowing other creditors to know of the solar provider’s legal rights to your solar assets, should your payments lapse into default.
But when a mortgage lender unfamiliar with UCC filings or solar loans conducts a standard lien search on your property’s address and sees the filing associated with your solar equipment, they may assume that it is a lien on the property and halt the buyer’s home loan on the spot.
* The content, views, and opinions expressed by this guest contributor are those of that individual and do not necessarily reflect those of Solar Mosaic LLC.
Ensuring Your Solar Home Sale Goes Smoothly
Selling your solar-powered home when there’s a solar loan lien in place may take an extra step or two, but with the right preparation you can ensure the sale goes smoothly for all parties. Understanding your UCC-1 Filing and solar loan agreement is a critical step, and having this knowledge on hand will hopefully save you, your buyer, and your buyer’s lender a lot of unnecessary concern.
Another step is educating the buyer about your solar installation and the value it adds, which we discussed in this blog. To maximize the additional sales premium you can get for your solar system, you may also want to consider using a real estate agent with experience in solar homes who grasps the unique issues and opportunities associated with a solar home sale. Greg Field is one example, and he’s posted a series of informative videos on the subject — check them out!
What About Refinancing Your Solar Home?
Refinancing the mortgage on your solar-powered home when there’s a solar loan in place may take an extra step or two, but with the right preparation, you can ensure the refinance goes smoothly. Understanding your UCC-1 Filing and solar loan agreement is a critical step, and having this knowledge on hand will hopefully save you and your lender a lot of unnecessary concern.
When refinancing your mortgage, there are two ways to deal with the solar lien: either contact us and we will confirm to any mortgage lender that our lien is limited to the Solar Equipment and does not extend to any part of the Residence, or you need to simply pay off the balance of the loan, such as with proceeds from your refinance, which will trigger the release of the lien. Your solar panels likely increased your home value due to the added value of your solar system, and using that value to pay off the solar loan in escrow is usually the easiest option.
Alternatively, upon request, we may agree to lift our county fixture filing, if any, on the Solar Equipment for a limited period for a cost of $250 or more depending on costs incurred and whether we will be able to refile upon closing of the mortgage refinancing.
Want to learn more about going solar with a loan through Mosaic? Click here if you’re a homeowner, or, click here if you’re a contractor interested in growing your business by offering access to simple, affordable financing options for solar as well as batteries.