Texas cash-out refinance rules

What makes Texas different

In Texas, any loan that takes cash out of the home you live in, your homestead, is a home equity loan under Article XVI, Section 50(a)(6) of the Texas Constitution. Lenders call it a "Texas cash-out" or an "A6" loan.

That covers a cash-out refinance of your first mortgage, a second-lien home equity loan and a home equity line of credit. A refinance that only pays off your current loan and closing costs, with no cash to you, isn't covered by these rules.

How much you can take out

All the loans on your home combined can't be more than 80% of its fair market value when the new loan closes. You keep at least 20% equity.

An illustration only. The value comes from an appraisal, and you and the lender both sign an acknowledgment of the home's fair market value at closing.

The 12-day wait and other timing

• 12 days before closing: the loan can't close until 12 days after the later of your application or the date you receive the required Texas home equity notice.
• One business day before closing: you get a final itemized list of fees, points, interest and costs, unless you agree otherwise.
• Close in person at a lender's office, a title company or an attorney's office. Not at your kitchen table.
• 3 days to change your mind after closing, with no penalty.
• Once a year: a new Texas home equity loan generally can't close within a year of the last one on the same home.

Put together, plan on about two to three weeks from application to cash in hand.

The 2% fee cap

Fees to make the loan can't be more than 2% of the loan amount. A few costs don't count toward that cap:

• Interest and discount points used to buy down your rate.
• A third-party appraisal and a property survey.
• The lender's title insurance base premium and a title exam.

On a $300,000 cash-out refinance, capped fees can't be more than $6,000.

Which loans can do it

• Conventional: yes. This is how almost every Texas cash-out on a homestead is done. With Fannie Mae, the home has to be a single-unit primary residence.
• VA: not on your homestead. A 2018 Texas Attorney General opinion said a VA cash-out can't meet the constitution's rules. A proposal to change that in 2025 didn't pass. Veterans can still use a conventional Texas cash-out, or a VA refinance that doesn't take cash out.
• FHA and USDA: not available for cash-out on a Texas homestead.
• Rentals and second homes: these rules don't apply. Cash-out follows the lender's normal limits, which are usually lower for rentals. Investors often use a DSCR cash-out refinance.

Protections you get

These rules are strict for a reason. Texas home equity loans come with protections most borrowers never hear about:

• No personal liability: the lender can look only to the home, not your other assets, unless the loan was obtained by fraud.
• Foreclosure only with a court order.
• No prepayment penalty, and no being called due just because your home's value drops.
• No extra collateral beyond the home itself.

Refinancing out later

For years Texas had a rule called "once an A6, always an A6": every later refinance of that home stayed under the home equity rules. Since 2018 you can switch back to a regular mortgage if:

1. At least one year has passed since the home equity loan closed.
2. You take no new cash beyond paying off loans and closing costs.
3. The new loan is at or under 80% of the home's value.
4. You get a special Texas refinance notice at least 12 days before closing.

Before you take cash out, it's worth asking whether you'd give up a low rate on your current mortgage. Depending on your rate and how much you need, keeping your first mortgage and adding a smaller home equity loan or a HELOC (home equity line of credit) behind it can cost less. I offer both, and I'll run the numbers each way so you can compare.