PACE Loans Sold as a "Government Program"

PACE (Property Assessed Clean Energy) financing lets you pay for solar and other home upgrades through an assessment added to your property tax bill. Local governments authorize PACE programs, which is why sellers often call it a “government program.” But the money comes from private companies, it carries interest and fees, and it’s secured by a lien on your home. PACE can be legitimate. Selling it as a government benefit, or as “not really a loan,” is a serious red flag.

Why salespeople push it

• Easy approval. PACE has historically been approved mainly on home equity and tax payment history, not income, so almost any homeowner qualifies.
• The “government” halo. Because a city or county authorizes the program, it’s easy to imply it’s a public benefit.
• Payments are hidden in taxes. The cost shows up once or twice a year on a tax bill, or folded into your mortgage escrow, so the monthly impact feels invisible at signing.

Regulators have acted on PACE sales before. The FTC and California attorney general reached a $3 million settlement with PACE lender Ygrene over its practices, and press reports describe low-income homeowners pressured into PACE loans by contractors. California’s DFPI now oversees PACE lending in that state.

Why the lien matters

A PACE assessment is attached to the property, not just to you. In general:

• Unpaid PACE payments are treated like unpaid property taxes, which can ultimately lead to a tax lien sale or foreclosure.
• Refinancing and selling get harder. Many mortgage lenders require PACE to be paid off before they’ll refinance or finance a buyer’s purchase.
• Your escrow payment can jump. If your mortgage pays property taxes through escrow, your lender will raise your monthly payment to cover the new assessment, sometimes with a catch-up amount.

A worked example

A homeowner signs a PACE assessment for a solar system. The rep says “it’s just on your taxes.” A year later:

• The property tax bill rises by the annual PACE payment.
• The mortgage servicer recalculates escrow, and the monthly mortgage payment goes up, possibly with a shortage to make up.
• When the owner tries to refinance or sell, the lender or buyer’s lender requires the PACE balance to be paid off at closing.

Compare that with a HELOC at about 7.34% (Bankrate national average, October 2026) or a credit union loan, which don’t add to your tax bill. Run the numbers in our solar loan calculator, and see solar financing options.

How it shows up in the paperwork

• An “assessment contract” or “financing agreement” with a city, county or program name at the top and a private administrator in the fine print.
• A total repayment amount much larger than the project price, once interest and fees are included.
• A long repayment term that can outlast your plans to stay in the home.
• Signatures gathered on a tablet, sometimes with the homeowner unaware a lien was involved.

Questions to ask

• “Is this a loan? Who is the lender or program administrator?”
• “What is the interest rate, what are all the fees, and what’s the total I’ll repay?”
• “Will this create a lien on my home? Does it take priority over my mortgage?”
• “What happens if I want to refinance or sell in five years?”
• “Can I pay it off early without a penalty?”

Where to report

If PACE was presented as a free or government program, or you didn’t understand a lien was being placed on your home, report it to the FTC at reportfraud.ftc.gov, your state attorney general, and the CFPB. In California, also contact the DFPI. Use our cancel solar contract tool to check whether you can still cancel, and read our guides on the “free solar” government program myth and solar property taxes and insurance.