What is a PACE loan?

PACE (Property Assessed Clean Energy) loans are a financing program for energy-efficient home improvement projects.

These projects may include a new roof, air conditioner, or solar panels. The unusual thing about PACE loans is how you pay back the loan. PACE borrowers often are not required to pay anything upfront for the work. Instead, the amounts are added to their property taxes. Whether PACE loans are available depends on what county you live in.

Be cautious in entering into a PACE loan.

If you are unable to pay the PACE loan amount added to your property taxes, you may lose your home in a foreclosure. A PACE loan can also impact the resale of your home. Many government loan programs – such as HUD, FHA, and VA – will not provide mortgage financing to a buyer if there is a PACE loan on the property. Also, you may have to pay a penalty if you want to pay off a PACE loan before the loan comes due.

Some counties have their own rules that require the lender to tell you things upfront about the loan. If you decide to enter into a PACE loan, make sure you fully understand the requirements on paying the loan back. Request a written explanation of the total cost and how long you have to repay the amount.

We recommend that you consult with an attorney before you sign a PACE contract.