Texas Cash-Out Refinance Rules Every Homeowner Should Know

Texas treats home equity differently from every other state. Most states leave cash-out refinance limits to lenders and investors. Texas writes them into Article XVI, Section 50 of the Texas Constitution — which means they are not negotiable, not waivable by your lender, and not something a broker can find an exception for.

If you are a Texas homeowner thinking about pulling cash out of your home, these are the rules that will shape what is possible.

Key takeaways

• Your total mortgage debt after a cash-out refinance cannot exceed 80% of your home's fair market value.
• Most fees paid to originate the loan are capped at 2% of the loan amount, with specific exclusions for appraisal, survey, and title costs.
• The loan cannot close until the 12th day after you apply or receive the required notice, whichever is later.
• You generally cannot close a new Texas home equity loan within one year of closing your last one.
• Closing must happen at the office of the lender, a title company, or an attorney — not at your kitchen table.
• You have a three-day right to cancel after closing.

The 80% limit is a hard ceiling

Section 50(a)(6)(B) says a home equity loan must be "of a principal amount that when added to the aggregate total of the outstanding principal balances of all other indebtedness secured by valid encumbrances of record against the homestead does not exceed 80 percent of the fair market value of the homestead."

Two details matter here.

First, this is a combined limit. It counts your new loan plus every other lien recorded against the property — a second mortgage, a home equity line, a solar lien. Not just the new loan by itself.

Second, it is measured against fair market value, which is established by an appraisal, and the constitution requires that you and the lender sign a written acknowledgment of that value at closing.

The same 80% ceiling applies to a Texas home equity line of credit under Section 50(t)(5).

The 2% fee cap, and what it does not include

Section 50(a)(6)(E) caps the fees you can be charged "to originate, evaluate, maintain, record, insure, or service the extension of credit" at 2% of the original principal amount.

Four costs are specifically carved out of that 2% calculation:

• an appraisal performed by a third-party appraiser
• a property survey performed by a state registered or licensed surveyor
• the state base premium for a mortgagee policy of title insurance with endorsements
• a title examination report, if it costs less than the state base premium for a mortgagee title policy without endorsements

Interest and bona fide discount points used to buy down your rate are also outside the cap.

This is one reason Texas cash-out pricing can look different from other states. Lenders are working inside a fixed fee budget, so how a loan is structured matters more here than it does elsewhere.

The 12-day rule and the one-business-day rule

Texas requires two separate waiting periods before a home equity loan can close.

Under Section 50(a)(6)(M)(i), the loan cannot close before the 12th day after the later of: the date you submitted your application, or the date the lender gave you the required constitutional notice.

Under Section 50(a)(6)(M)(ii), the loan also cannot close until one business day after you receive a copy of your loan application and a final itemized disclosure of the actual fees, points, interest, costs, and charges that will be charged at closing. If there is a bona fide emergency or other good cause and you consent in writing, the lender may provide or modify that documentation on the closing date.

Plan your timeline around these. They are not lender processing delays — they are constitutional requirements, and no one can compress them.

One home equity loan per year

Section 50(a)(6)(M)(iii) prohibits closing a new home equity loan before the first anniversary of the closing date of any other Section 50(a)(6) loan secured by the same homestead.

There are narrow exceptions: a refinance described in Paragraph (Q)(x)(f), and a situation where the owner requests an earlier closing under oath because of a state of emergency declared by the President or the governor that applies to the area where the homestead is located.

Protections you get in exchange

Texas pairs these restrictions with borrower protections that do not exist in most states:

• No personal liability. Section 50(a)(6)(C) makes the loan "without recourse for personal liability against each owner and the spouse of each owner," unless the loan was obtained by actual fraud.
• Court-ordered foreclosure only. Under Section 50(a)(6)(D), the lien "may be foreclosed upon only by a court order."
• No prepayment penalty. Section 50(a)(6)(G) requires the loan to be "payable in advance without penalty or other charge."
• Right to cancel. Section 50(a)(6)(Q)(viii) gives you and your spouse three days after closing to rescind without penalty or charge.
• Where you sign. Section 50(a)(6)(N) requires closing "only at the office of the lender, an attorney at law, or a title company."

There is also a meaningful enforcement mechanism. Under Paragraph (Q)(x), a lender that fails to comply with its obligations and does not correct the failure within 60 days after being notified by the borrower forfeits all principal and interest on the loan.

The rule most Texas homeowners have not heard of

For years, the rule was effectively "once a home equity loan, always a home equity loan." A Section 50(a)(6) loan could only be refinanced into another Section 50(a)(6) loan, so the restrictions followed the property indefinitely.

Section 50(f)(2) now allows a Texas home equity loan to be refinanced into a non-home-equity loan if all of the following are met:

1. The refinance does not close before the first anniversary of the date the home equity loan closed.
2. The refinance includes no additional funds other than money to refinance debt described in Subsections (a)(1) through (a)(7), plus actual costs and reserves required by the lender. In practice: no cash out.
3. The new loan, added to all other liens of record, does not exceed 80% of fair market value.
4. The lender provides a specific written notice on a separate document, no later than the third business day after you apply and at least 12 days before closing.

That notice is required to spell out what you are giving up in plain terms — that a non-home-equity loan "will permit the lender to foreclose without a court order" and "will be with recourse for personal liability against you and your spouse."

This is a real decision, not a formality. Converting can change your pricing, but it also removes the non-recourse and judicial-foreclosure protections that make Texas home equity loans unusually borrower-friendly. Read the notice carefully and consider talking to an attorney.

Texas HELOC rules are separate

If you are considering a home equity line of credit rather than a lump-sum refinance, Section 50(t) adds its own requirements:

• Any single draw must be at least $4,000 (Section 50(t)(2)).
• You cannot use a credit card, debit card, similar device, or unsolicited preprinted check to take an advance (Section 50(t)(3)).
• Fees under Paragraph (a)(6)(E) are charged only when the line is established — not on individual draws (Section 50(t)(4)).
• The maximum principal, combined with all other liens, is subject to the same 80% ceiling (Section 50(t)(5)).

You can compare structures on our HELOC program page and conventional loan page.

What this means when you shop

Because the ceiling, the fee cap, and the timeline are set by the constitution, every lender in Texas is working inside the same box. What actually differs between lenders is pricing, which costs land inside the 2% cap, and whether your file is structured correctly the first time — a compliance error here is not a minor fix.

If you are buying rather than refinancing, our Texas loan limits guide covers conforming and FHA limits by county, and our Texas down payment assistance guide covers TDHCA and TSAHC programs.

Local market pages: Austin, Houston, Dallas–Fort Worth, and San Antonio.

To talk through your situation with someone licensed in Texas, browse our loan officer directory or get started.

Frequently Asked Questions About Texas Cash-Out Refinances

How much cash can I take out of my home in Texas?

Your new loan plus every other lien recorded against the property cannot exceed 80% of the home's fair market value. That combined ceiling is set by Article XVI, Section 50(a)(6)(B) of the Texas Constitution and applies to home equity lines of credit as well.

How long does a Texas cash-out refinance take to close?

The loan cannot close before the 12th day after the later of your application date or the date you received the required constitutional notice, and not until one business day after you receive your loan application copy and a final itemized fee disclosure. Those minimums are constitutional, not lender processing time.

Can I do a cash-out refinance in Texas more than once a year?

Generally no. Section 50(a)(6)(M)(iii) prohibits closing a new home equity loan before the first anniversary of your last one on the same homestead, with narrow exceptions for certain refinances and for declared states of emergency affecting your area.

Can a Texas home equity loan be converted to a regular mortgage?

Yes, under Section 50(f)(2), if the refinance closes at least one year after the home equity loan, includes no additional cash beyond refinancing costs and reserves, stays within 80% of fair market value, and the lender delivers the required written notice at least 12 days before closing.

What fees are capped on a Texas home equity loan?

Fees to originate, evaluate, maintain, record, insure, or service the loan are capped at 2% of the loan amount. Third-party appraisal, licensed survey, the state base premium for a mortgagee title policy, and a qualifying title examination report are excluded, as are interest and bona fide discount points.

Sources

• Texas Constitution, Article XVI, Section 50 — Texas Constitution and Statutes, Texas Legislative Council
• Texas Constitution, Article XVI, Section 50(f) and 50(t) — Texas Constitution and Statutes, Texas Legislative Council

This article is for general information only and is not legal, tax, or financial advice. State law and investor guidelines change; confirm current requirements with a licensed professional before making decisions. Xpert Home Lending, Inc. is an Equal Housing Lender.