Texas is different, on purpose
Most states treat borrowing against your home as ordinary lending. Texas does not. Since 1997 the Texas Constitution has protected the homestead with a specific set of rules for home equity lending, found in Article XVI, Section 50. Every lender follows them. Knowing them before you start saves time and disappointment.
The ones that matter most:
- The 80 percent line. Everything secured by your homestead, old mortgage plus new, cannot exceed 80 percent of the home’s fair market value.
- The 12-day wait. Closing cannot happen until at least 12 days after you apply and receive the required notice.
- Where you sign. A home equity loan must close at the office of a lender, an attorney or a title company — not at your kitchen table.
- Once a year, one at a time. Only one home equity loan on the homestead, and closings at least a year apart.
- Three days to change your mind. You have a right to rescind after closing.
- A cap on certain fees. Two percent of the loan amount, with appraisal, survey and title insurance among the exclusions.
HELOC, home equity loan or cash-out refinance?
A home equity line of credit (HELOC) gives you a line to draw on. It suits costs that arrive over time — a renovation paid in stages, tuition across semesters. In Texas each advance must be at least $4,000.
A home equity loan gives you a lump sum behind your existing mortgage. It suits a single known cost and keeps your first mortgage exactly as it is — which matters if your current terms are better than today’s market.
A cash-out refinance replaces your first mortgage with a larger one. It can make sense when refinancing the first mortgage is worthwhile anyway. When it is secured by your homestead and puts cash in your hand, Texas treats it as home equity lending with the same rules.
The right answer usually comes from one question: is your current first mortgage worth keeping?
What people use it for
Renovations and repairs after a Gulf Coast storm season. Paying off higher-cost debt. A child’s tuition. Capital for a business. The down payment on a rental or a second home. None of these is automatically a good or a bad idea — it depends on the numbers, and on whether you would be comfortable if the home’s value moved.
Self-employed? Home equity still works
If your income is hard to document, non-QM home equity options exist too. See non-QM loans for how bank-statement qualifying works.
Veterans and seniors
VA borrowers can look at a VA cash-out refinance — see VA loans in Texas. Homeowners 62 and older may want to compare a home equity loan with a reverse mortgage, which works very differently.
What I will not do on this page
Quote rates, terms or payments, or estimate what your home is worth. An appraisal sets value; your file and the program set the terms. Applications, pricing and required Texas disclosures — including the 12-day notice — are handled by All Western Mortgage.