Home equity and HELOC in Texas.

Why Texas is different

Texas did not permit home equity lending at all until 1997. When voters finally allowed it, the protections went into the Texas Constitution rather than into ordinary statute — Article XVI, Section 50(a)(6). Lenders and loan officers refer to these simply as “fifty-a-six” loans.

That distinction matters. Rules in a constitution are not adjusted by a legislature having a busy session; they change only when Texas voters amend them, which has happened a handful of times in nearly thirty years. The practical effect is that Texas homeowners have protections no other state gives, and Texas lenders have constraints no other state imposes.

The rules that actually change your options

• Eighty percent of value, counting everything. All debt secured by your homestead — your first mortgage plus any home equity loan or line — is capped at 80% of the home’s fair market value. On a line of credit the cap applies to the entire credit limit, not just what you have drawn.
• A two percent ceiling on lender fees. Certain lender fees are capped at 2% of the loan amount. Third-party appraisals, surveys and title insurance premiums sit outside that cap.
• One at a time. Only one Section 50(a)(6) loan may be secured by your homestead at any moment. Taking a new one means paying off the existing one.
• Once every twelve months. At least a year must pass between home equity closings on the same property.
• A twelve-day wait. Closing cannot happen sooner than twelve days after you apply and receive the required written notice. It is a floor, not a target, and no lender can shorten it.
• Three days to change your mind. You have three business days after closing to rescind, and funds generally are not disbursed until that window closes.
• Where you sign is regulated. Closing must take place at the permanent office of a lender, an attorney, or a title company. Not at your kitchen table.
• The house is the lender’s only recourse. Absent fraud, a Texas home equity lender’s remedy runs against the property, not against you personally. This is the single strongest protection in the whole section.

On a Texas home equity line specifically, each advance has a minimum size and the line cannot be accessed with a credit card.

What this means in practice

Your first mortgage eats the room. The 80% ceiling counts everything at once. A Texas homeowner with a large first mortgage may have real equity on paper and very little borrowing room underneath the cap. Work out where you stand before you plan around a number — start with an estimate of your home’s value and subtract every loan secured by it.

Nothing here closes fast. Twelve days after application, then three days after closing. Build eighteen to twenty days of statutory waiting into any plan, before underwriting time. If someone promises you a Texas home equity closing next week, something is wrong.

Once a year is a real constraint. Because you get one bite every twelve months, it is worth deciding whether you want a lump sum now or a line you can draw against over time. Getting that choice wrong means waiting a year to change it.

A 2017 amendment opened one door. Proposition 2 allows a Texas home equity loan to be refinanced into an ordinary rate-and-term mortgage after twelve months, with no new cash taken, provided the statutory conditions are met. Before that, a 50(a)(6) loan stayed a 50(a)(6) loan for life.

Questions Texas homeowners ask

Does the 80% cap include my first mortgage?

Yes. Every lien against the homestead counts toward the same 80%. This is the single most common misunderstanding, and it is the one that ends the most Texas equity conversations early.

Can I have a home equity loan and a HELOC at the same time?

No. One Section 50(a)(6) lien on the homestead at a time.

Can I close at home, or remotely?

No. The constitution names the permitted locations: a lender’s permanent office, an attorney’s office, or a title company. That requirement is not waivable.

What happens if I cannot repay it?

Absent fraud, the lender’s remedy is against the home. There is no personal deficiency judgment on a Texas home equity loan — a protection Texas homeowners have and most Americans do not.

Do these rules apply to my rental property?

No. Section 50(a)(6) governs the homestead. An investment property in Texas is financed under ordinary rules — see DSCR loans if the property is a rental.

Is a cash-out refinance treated the same way?

On a Texas homestead, a cash-out refinance is itself a Section 50(a)(6) transaction and carries the same rules. That surprises people moving to Texas from other states, where a cash-out is just a refinance.

This page describes Texas law in general terms and is not legal advice or a commitment to lend. Rules change and individual circumstances vary — confirm anything you intend to rely on with a licensed loan officer. See also our Texas Consumer Complaint and Recovery Fund Notice and State Disclosures.