In Texas, borrowing against the equity in your homestead is governed by Section 50(a)(6) of the Texas Constitution. All loans on the home combined generally cannot exceed 80% of its value. You must wait at least 12 days after receiving the required notice before closing, you have 3 days after closing to cancel, and you can generally do this only once every 12 months.
Key takeaways
- 80% combined loan-to-value cap on your homestead
- 12-day waiting period before closing
- 3-day right to cancel after closing
- Generally one Texas home equity loan every 12 months
- Rentals and second homes are not covered by these limits
Why Texas is different
Texas protects homesteads more than almost any other state. For most of the state's history, you could not borrow against your home's equity at all. Since 1997, it has been allowed, but only under a strict set of consumer protections written into the Texas Constitution, in Section 50(a)(6). Lenders call these "Texas cash-out" or "a6" loans.
The rules, one by one
- 80% maximum. All loans secured by your homestead combined generally cannot exceed 80% of the home's fair market value.
- 12-day notice. You must receive a written notice explaining your rights, and closing can't happen until at least 12 days later.
- 3-day right to cancel. After closing you have three days to cancel the loan without penalty.
- Once every 12 months. Generally, you can't close a new Texas home equity loan on the same homestead within a year of the last one.
- Cap on certain fees. Certain lender fees are capped at 2% of the loan amount. Some costs, such as the appraisal, survey and title insurance, are excluded from the cap.
- Where you close. The loan must close at the lender's office, an attorney's office or a title company. No kitchen-table closings.
- Everyone signs. Every owner and their spouse must consent.
What these rules do not cover
Section 50(a)(6) protects your homestead. Rental properties and second homes are not homesteads, so they are not subject to the 80% cap or the 12-day wait. Depending on the program, higher limits may be available. Investors often pull cash from a rental with a DSCR cash-out refinance.
How to figure out how much you can take
Example: a $425,000 home × 80% = $340,000. Subtract a $210,000 balance and you have roughly $130,000 in available equity before closing costs. Try it on our equity calculator.
Hypothetical figures for illustration only. This is general information, not legal advice.
Cash-out refi or second mortgage?
You don't always have to refinance your whole first mortgage to get cash. If your current rate is low, a fixed-rate second mortgage can leave it untouched. See cash-out refinance vs. second mortgage.
Common questions
How long does a Texas cash-out refinance take?
Plan on at least two to three weeks because of the 12-day notice period, plus time for the appraisal and underwriting. We send the notice early so the clock starts right away.
Can I do a cash-out refinance on a rental property in Texas?
Yes. Rentals are not homesteads, so the Section 50(a)(6) limits do not apply. Investment property cash-out follows the loan program's own limits.
Do Texas rules apply to second mortgages too?
Yes. A closed-end second mortgage on your homestead that gives you cash is also a Texas home equity loan and follows the same protections, including the 80% limit.
Can I ever refinance out of a Texas home equity loan?
In some cases, yes. Texas law allows a home equity loan to be refinanced into a regular loan when certain conditions are met, including timing and loan-to-value requirements. We will review your situation.
Brad or Buddy will review your goals and send you a personal game plan within the hour. No credit pull.
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