Property Assessed Clean Energy (PACE) financing is a mechanism, not a grant or tax credit, that lets homeowners borrow money for solar and other energy upgrades and repay the loan through their property tax bill. It is available in about 20 states and is administered by local governments or their program partners.
How PACE works
A PACE lender covers the upfront cost of your solar installation. You then repay the loan over 5 to 30 years as an assessment added to your annual property tax bill. Because repayment is tied to the property, not to you personally, PACE lenders do not require a strong credit score and the assessment transfers to the new owner if you sell.
The risks
PACE loans have been the subject of significant consumer protection concerns. The assessment takes priority over your mortgage in a foreclosure, which means lenders may be reluctant to refinance or buy a home with an outstanding PACE lien. Interest rates are often higher than traditional home equity loans. Monthly payment structures can be confusing because the assessment is folded into the property tax bill. The Consumer Financial Protection Bureau has issued guidance on PACE loan disclosures; a rule finalized in 2024 requires lenders to comply with mortgage lending protections.
Alternatives to consider first
Before choosing PACE, compare it against a home equity loan, a home equity line of credit, or a personal solar loan. If you have sufficient equity and good credit, traditional financing typically offers lower rates and does not create a tax-priority lien on your property. Some states also offer low-interest green bank loans specifically for solar that are more favorable than PACE.