TL;DR summary
- In Texas, all the debt on your home, the new loan included, stays at or under 80% of the home's value, not 80% of your equity.
- Closing waits until the 12th day after the later of your application or the state's required notice, and you get three days afterward to change your mind.
- Fees on a home-equity loan are capped at 2% of the amount borrowed, with a few costs like the appraisal and survey left outside that cap.
- Texas HELOCs exist with their own rules, and since 2018 farm and ranch homesteads can borrow against their equity too.
Your house has a bodyguard
Your house has a bodyguard. Nobody mentioned it at closing, but it's been on duty since the day you moved in, and its job description is written into the Texas Constitution. (Texas doesn't do anything small. Including its constitution.)
Article XVI, section 50 protects your homestead from being sold to pay most debts, then lists the loans that are allowed to be secured by it anyway. Think of that list as the guest list at the door. A home-equity loan is on it, under section 50(a)(6). A home-equity line of credit, or HELOC, is on it too, described in section 50(t).
That's why Texas rules sound strict. They aren't there to make borrowing hard. They're there so nobody talks you into putting your home at risk in a hurry. A good bodyguard doesn't keep you home on a Saturday night. It just makes sure nobody hustles you into the wrong truck.
The part that catches people off guard: in Texas, a cash-out refinance on your homestead is a home-equity loan too. Under section 50(e), when a refinance hands you new cash beyond what it takes to refinance, it has to meet the section 50(a)(6) rules. So everything on this page applies to a cash-out refinance as well.
These rules protect a homestead, the home you live in. A rental property isn't your homestead, so the bodyguard isn't posted there. If you're borrowing on a rental, a DSCR loan in Texas is the place to start.
1. Homestead only
These rules protect the home you live in, not a rental.
2. One equity loan
Only one home-equity loan can be secured by your home at once.
3. Three days
You and your spouse can cancel within three days of closing.
The 80% rule counts everybody already inside
Section 50(a)(6)(B) says the new loan, added to everything else you owe against the home, can't go past 80 percent of the home's fair market value on the day the loan is made. A lot of people read that as "80% of my equity." It's 80% of the home's value, and that difference matters.
Picture the occupancy sign by a dance hall door. The number counts everybody already inside, not how many friends you can still bring. Your current mortgage is already out on the floor.
A made-up example shows why:
| Step | Amount |
|---|---|
| Home value | $400,000 |
| 80% of the value | $320,000 |
| Already owed on the home | $250,000 |
| Room for new borrowing | $70,000 |
Read it the wrong way, as 80% of your $150,000 of equity, and you'd expect $120,000. The real room is $70,000. That's a big gap to discover after you've already picked out the countertops.
What this means for you: add up what you owe, take a fair guess at the home's value, and the 80% math tells you roughly where you stand.
Nobody rushes you, and you still get the last word
Texas builds in time to think. Under section 50(a)(6)(M), a home-equity loan closes no sooner than the 12th day after the later of two dates: the day you apply, or the day the lender gives you the state's written notice about home-equity loans. So the clock starts on whichever of those happens last, not the first one. (Yes, the bodyguard checks the timestamps.)
After closing, section 50(a)(6)(Q)(viii) gives you and your spouse three days to cancel the loan without penalty or charge. Even after the door shuts, you can still change your mind.
Two more timing rules are worth knowing. Only one home-equity loan can be secured by your home at a time. And a new home-equity loan generally can't close until a year after the last one on the same home closed.
If that sounds slow... that's the point. It's your house. Taking your time is the whole idea.
What this means for you: plan on a couple of weeks from application to closing, and give the people counting on the money a heads-up early.
The bodyguard reads the bill: a 2% fee cap
Section 50(a)(6)(E) caps the fees to make, record, insure or service the loan at 2 percent of the original amount borrowed. Interest and bona fide discount points (an optional upfront charge paid to buy down the interest) sit outside that cap. So do a few costs that used to crowd smaller loans out: a third-party appraisal (fair enough), a property survey (sure), and the state base premium for the lender's title insurance policy, among others (turns out the bodyguard reads the fine print, too).
Before 2018, the cap was 3 percent, but those costs counted inside it. Texas voters lowered it to 2 percent in 2017 and moved those costs outside, which the Senate's own analysis says was meant to make smaller home-equity loans workable again. Honest take: that fix was overdue.
What this means for you: the 2% cap is a ceiling, not a price. Your own costs depend on your loan, and we can walk through them line by line together.
Lines of credit: allowed, on a short leash
Texas does allow HELOCs. Voters added them in 2003, and section 50(t) sets their rules, which keep a line of credit from behaving like a credit card:
- Each draw has to be at least $4,000.
- You can't draw with a credit card, debit card or a check you didn't ask for.
- Fees are charged when the line is set up, not on each draw.
- The full line, added to everything else you owe on the home, stays inside the same 80% of value.
(So, no swiping it for breakfast tacos.)
Until 2018, a Texas HELOC also stopped allowing new draws once the balance passed 50% of the home's value. The 2017 amendment raised that to 80%, the same as a home-equity loan.
A line of credit suits money you'll need in pieces over time. If you'd rather have the cash at once and a fixed plan to pay it back, a home-equity loan or a cash-out refinance does that.
2018: new orders for the bodyguard, and a way out
The amendment Texas voters approved in November 2017 took effect on January 1, 2018. Most pages online still don't mention it. What it changed:
| Change | Before 2018 | Since 2018 |
|---|---|---|
| Fee cap | 3%, appraisal and survey inside it | 2%, with those costs outside it |
| Farm and ranch homesteads | Not eligible | Eligible, keeping agricultural valuation |
| HELOC draws | Stopped once the balance passed 50% of value | Same 80% limit as other home-equity loans |
| Leaving home-equity rules | No route back | A refinance into a regular loan, under conditions |
That last row matters most if you already have one. Under section 50(f)(2), a home-equity loan can be refinanced into a regular, non-home-equity loan when four things are true: at least a year has passed since it closed, the refinance adds no new cash beyond what it takes to refinance, all the debt on the home stays at or under 80% of its value, and you get a written notice at least 12 days before closing.
What this means for you: an older Texas home-equity loan isn't a life sentence. If you'd like to fold it into one regular loan, that's a conversation worth having.
Nobody should have to study their state's constitution just to borrow against a house they already own. That's what the conversation is for. Your bodyguard has been on duty this whole time, and it's on your side. It just likes to see the paperwork first.
Before you apply
- Take a fair guess at your home's value and add up everything you owe on it, so the 80% math is real.
- Decide whether you'd rather have the cash at once or draw it over time.
- Confirm the home is your homestead, since a rental follows different rules.
- Line up your plans with the 12-day wait, so the money arrives when you need it.
- If you already have a home-equity loan, find its closing date, since the one-year rules start there.
