Solar Panels & Mortgage Approval in Canada

This article is for informational purposes only and does not constitute financial advice. Speak with a licensed mortgage professional before making any mortgage decisions.

Quick Answer

Why Solar Is Suddenly a Mortgage Question

A decade ago, solar was a personal energy decision. Today, panels show up in offer packages, refinance files, and appraisal reports — and can quietly change whether a mortgage closes on time.

Canadian lenders are paying closer attention because more homes come with panels attached, and the arrangements behind those panels are not all equal. Some homeowners paid cash. Others financed the install. Many signed a long-term lease or power-purchase agreement (PPA), where a solar company owns the equipment on the roof.

That distinction matters. A leased or PPA system creates an obligation that follows the home, and lenders need to know what happens to it on closing. None of this is a dealbreaker when handled early.

Quick Start: Pick Your Path

Owned vs Leased vs PPA: Why Ownership Structure Decides Everything

Owned outright

The homeowner paid cash or financed the install and owns the equipment. The panels are a fixture of the property. Lenders typically treat them like a finished basement or heat pump: a feature, not an obligation.

Leased

A solar company owns the panels and rents them to the homeowner, usually for 10 to 25 years. The lease stays with the property. A buyer inherits the lease unless it is paid out or renegotiated before closing.

Power-purchase agreement (PPA)

Similar to a lease, but instead of a fixed monthly rent, the homeowner buys the electricity the panels produce at an agreed rate. Same underwriting concern applies.

Understanding which category you are in is the single most important step. As Razi Khan, Founder and Mortgage Broker at Pegasus often reminds clients: the panels themselves are rarely the problem — the paperwork behind them is. Our mortgage glossary defines the key terms in plain language.

How Lenders Treat Each Solar Ownership Type

Working with an independent broker who shops the market can matter more here than on a standard file. One lender may decline a leased solar situation outright while another approves it with a simple lease assumption.

Financing New Solar Through Your Mortgage

Purchase Plus Improvements (PPI)

If you are buying a home and want to add solar shortly after closing, PPI lets you roll eligible upgrade costs — potentially including solar — into your insured mortgage. It is offered through the three default insurers: CMHC, Sagen, and Canada Guaranty. The lender advances funds against the improved value once quotes are approved.

Refinance

If you already own the home and have built equity, refinancing lets you increase your mortgage balance up to 80% of the home’s appraised value and use the extra funds to install solar. Our mortgage refinance calculator can help you model the numbers.

HELOC

A HELOC gives you flexible access to your equity without breaking your existing mortgage. Interest is typically higher than a mortgage but far below a personal loan.

Whichever route you choose, the amount you borrow is subject to the OSFI B-20 stress test at the greater of contract rate plus 2% or 5.25%. The Canada Greener Homes initiative may also apply — confirm current status directly with Natural Resources Canada before relying on it.

Figures shown are illustrative only — not a forecast.

Step-by-Step Roadmap: From Solar Question to Approved Mortgage

Whether you are buying, refinancing, or installing, the sequence below tends to keep files moving smoothly.

1. 1
   Identify ownershipAsk the seller (or check your records) whether the panels are owned, leased, or on a PPA. Get it in writing.
2. 2
   Request the paperworkFor a lease or PPA, get a full copy of the contract. For owned systems, gather install invoices and warranty documents.
3. 3
   Talk to a broker earlyBefore you commit to an offer or refinance, share the ownership details with a broker who can match your file to the right lender.
4. 4
   Confirm appraisal treatmentAsk whether the appraiser will note the panels and whether they will add contributory value.
5. 5
   Choose your resolution pathFor leased systems, that is usually a lease payout, a lease transfer to the buyer, or lender acceptance of the existing lease.
6. 6
   Loop in your lawyer or notaireThey coordinate paperwork with the solar company, especially in Quebec where the notarial closing handles lease transfer.
7. 7
   Confirm insurance premium impactOur CMHC insurance calculator can estimate any added premium.

What Appraisers Actually Do With Solar Panels

Homeowners often assume that spending $25,000 on solar adds $25,000 to appraised value. In Canada, that is rarely how it works.

Appraisers designated by the Appraisal Institute of Canada (AIC) assign what is called contributory value — the amount a typical buyer in the local market would actually pay extra for the feature. That number comes from comparable sales, not the install invoice.

For leased systems, the picture is different. Because a buyer is inheriting a monthly obligation, some appraisers note the lease as a neutral or slightly negative factor. For more on green upgrades and mortgage products, see our companion guide to green mortgage incentives in Canada.

Figures shown are illustrative only — not a forecast.

Common Mistakes to Avoid

Most solar-related mortgage headaches trace back to the same missteps. Sidestep these and your file moves faster.

• Signing an offer without asking about solar ownership. If you find out during financing that panels are leased, you may be past the point where you can renegotiate.
• Assuming any lender will finance a leased-solar home. Lender appetite varies. A pre-approval from one bank does not mean every bank will say yes to this property.
• Treating a PPA the same as an owned system. A power-purchase agreement is a contract, not a paid-for asset.
• Ignoring the lease’s transfer clause. Some leases require lessor approval for transfer, which takes time.
• Financing solar on a credit card. Monthly cost usually far exceeds a mortgage refinance or HELOC option.
• Skipping the appraisal conversation. If you are counting on solar to boost value, confirm that up front.

First-time buyers can find more guardrails in our first-time buyer resource hub.

Frequently Asked Questions

For more general questions, our mortgage FAQ covers the essentials.

About the author

Razi Khan

Founder, CEO & Licensed Mortgage Broker · Pegasus Mortgage Lending · Toronto, Ontario · FSRA Lic # 11479

Razi Khan is the Founder, CEO, and a licensed Mortgage Broker at Pegasus Mortgage Lending Center Inc., based in Toronto. With over 20 years of experience in the Canadian mortgage industry, Razi has personally guided more than 3,000 clients through some of the most complex and high-stakes financial decisions of their lives — from first-time purchases in the GTA to refinancing strategies, alternative lending solutions, and cross-border mortgages for Canadians buying in the United States.

Razi founded Pegasus in October 2008, launching the brokerage at the height of a global financial crisis. He works across the full spectrum of borrower profiles, with particular expertise in complex files including self-employed borrowers, credit-challenged clients, and investors building multi-property portfolios.

Learn more about Razi Khan →

Sources & References

1. Office of the Superintendent of Financial Institutions (OSFI) — Guideline B-20
2. Canada Mortgage and Housing Corporation (CMHC) — Mortgage Loan Insurance
3. Sagen — Homeownership solutions
4. Canada Guaranty — Homeownership mortgage insurance
5. Natural Resources Canada — Canada Greener Homes
6. Appraisal Institute of Canada — Professional standards
7. Financial Services Regulatory Authority of Ontario (FSRA)