If you have built up strong equity in your Texas home and want to tap it through a home equity loan, a HELOC, or a cash-out refinance, you will quickly discover that Texas writes its homestead borrowing rules directly into the state constitution.
This guide breaks down the 2026 Texas home equity loan rules under Article XVI, Section 50 of the Texas Constitution, including the 80% combined loan-to-value cap, the 2% fee limit, the 12-day waiting period, and the specific rules that govern a Texas HELOC.
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By the end, you will know how to estimate how much equity you can access, what the step-by-step closing timeline looks like, and how to compare a Texas HELOC, a closed-end home equity loan, and a cash-out refinance.
Why Texas Home Equity Loan Rules Are Different
In Texas, your primary residence—called your homestead—is protected by the state constitution from forced sale to pay off most debts. Under Article XVI, Section 50(a) of the Texas Constitution and Chapter 41 of the Texas Property Code, a mortgage or lien against a Texas homestead is completely invalid unless it fits into one of eight specific exceptions:
- Purchase money used to buy the home
- Property taxes on the homestead
- An owelty of partition lien (often used in divorce buyouts or co-owner divisions)
- A refinance of a valid lien, including certain federal tax liens
- Home improvement loans that follow strict written-contract rules
- Section 50(a)(6) extensions of credit (Texas home equity loans, cash-out refinances, and HELOCs)
- Section 50(a)(7) Texas Reverse Mortgages
- Manufactured-home conversion and refinance liens
Because every Texas home equity loan, HELOC, and homestead cash-out refinance is created under Section 50(a)(6), this guide calls them "(a)(6) loans." If a lender breaks the constitutional rules on an (a)(6) loan and fails to fix the violation within 60 days after you notify them, the lender can forfeit all principal and interest on the loan.
The Texas 80 Percent Rule for Home Equity (With Example)
The cornerstone of Texas home equity loan rules is the 80% combined loan-to-value (CLTV) cap under Section 50(a)(6)(B). When you take out a home equity loan, a Texas HELOC, or a cash-out refinance, your new loan's principal plus the unpaid principal of all other recorded liens on your homestead cannot exceed 80% of your home's fair market value on the date the loan is made.
In plain English, Texas law requires you to leave at least 20% equity in your homestead at closing. Any inception charges financed into the loan principal count toward the 80% cap, while interest that accrues after closing does not.
Worked Example of the 80% Rule
Example 1 below is the illustration used in the Texas Administrative Code (7 TAC §153.3); Example 2 applies the same math to a hypothetical $400,000 home:
| Calculation Step | Example 1: $100,000 Home | Example 2: $400,000 Home |
|---|---|---|
| Homestead Fair Market Value | $100,000 | $400,000 |
| Maximum Total Debt at 80% CLTV | $80,000 | $320,000 |
| Minus Existing First Mortgage Balance | $30,000 | $200,000 |
| Maximum Texas Home Equity Loan or HELOC | $50,000 | $120,000 |
At closing, both you and the lender must sign a written acknowledgment of the home's fair market value. Under Section 50(h), the lender can conclusively rely on that signed acknowledgment as long as it matches the value from an appraisal or evaluation prepared under state or federal requirements and the lender has no actual knowledge that the value is wrong.
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The 2% Fee Cap and What Is Excluded
Under Section 50(a)(6)(E) of the Texas Constitution, you cannot be required to pay fees to "originate, evaluate, maintain, record, insure, or service" a Texas home equity loan that exceed 2% of the original loan principal.
From 1997 until 2017, Texas capped these fees at 3%. In the November 7, 2017 constitutional election (Proposition 2 / S.J.R. 60), Texas voters lowered the cap to 2% of the original principal, excluded four third-party items from the cap, and stated that bona fide discount points are outside it.
The first five rows in the left column come from the Constitution itself; the remaining rows reflect the state's interpretation in 7 TAC §153.5.
| Excluded from the 2% Fee Cap (Does Not Count) | Counts Toward the 2% Fee Cap |
|---|---|
| Third-party appraisal fee | Fees to originate or evaluate the loan |
| Property survey by a state-registered or licensed surveyor | Fees to record, maintain, or service the loan |
| State base premium for a mortgagee title policy with endorsements | Title insurance charges above the excluded state base items |
| Title examination report (if it costs less than the state base premium for a mortgagee title policy without endorsements) | Mortgage insurance premiums (if applicable) |
| Interest (including per diem interest) and bona fide discount points used to buy down the interest rate | Mandatory lender or third-party closing charges not listed as excluded |
| Homeowner's insurance, flood insurance, and tax/insurance escrow reserves | — |
| Optional charges paid at the borrower's sole discretion, voluntary insurance (such as credit life), and later default charges (such as late fees) | — |
On a $100,000 Texas home equity loan, capped lender and origination fees cannot exceed $2,000, though you may still pay for excluded items such as the third-party appraisal, licensed survey, state base title premium, per diem interest, and escrow reserves.
Waiting Periods: The 12-Day Rule, 1-Day Disclosure, and 3-Day Rescission
Texas law builds mandatory cooling-off periods into every Section 50(a)(6) loan so you are never rushed into putting your homestead on the line.
1. The 12-Calendar-Day Waiting Period
Under Section 50(a)(6)(M)(i), a Texas home equity loan, HELOC, or cash-out refinance cannot close before the 12th calendar day after the later of two events:
- The date you submit your loan application (orally, electronically, or through the lender's agent), or
- The date the lender gives you the constitutional notice required by Section 50(g).
Per 7 TAC §153.12, these 12 days are calendar days, not business days. Day one is the calendar day after the later triggering event, and closing may take place on or after the 12th calendar day. The Section 50(g) notice must be provided on a separate document, and if your loan discussions were conducted mainly in a language other than English, the lender must also give you a translated copy before closing.
2. The One-Business-Day Final Disclosure Rule
Under Section 50(a)(6)(M)(ii) and 7 TAC §153.13, your loan cannot close until at least one business day after you receive both:
- A copy of your loan application (if not already provided), and
- A final itemized disclosure of the actual fees, points, interest, costs, and charges that will be charged at closing.
For a closed-end home equity loan or cash-out refinance, the federal TRID Closing Disclosure satisfies this requirement. For a Texas HELOC, the Regulation Z account-opening disclosures satisfy it. If you receive the final itemized disclosure on a Monday, the earliest you can close is during normal business hours on Tuesday (assuming the 12-calendar-day wait has also passed). The constitution allows a same-day modification at closing only if there is a bona fide emergency or other good cause and you consent in writing; under 7 TAC §153.13, good cause is presumed if total charges increase by no more than the greater of $100 or 0.125% of principal.
3. The 3-Day Right of Rescission After Closing
Even after you sign your closing papers, Section 50(a)(6)(Q)(viii) gives you and your spouse at least 3 days after closing to cancel (rescind) the transaction without penalty or charge.
State rules (7 TAC §153.25) count these as calendar days, extended past a Sunday or federal holiday, and also require lenders to follow the federal Truth in Lending Act (TILA), which provides three business days. Ask your lender to confirm your exact cancellation deadline in writing.
Key Texas Home Equity Rules Every Homeowner Must Know
Beyond the 80% cap, the 2% fee cap, and the waiting periods, Section 50(a)(6) sets strict rules on how often you can borrow, who must sign, where you close, and how you are protected if things go wrong.
One Home Equity Loan at a Time—and Only One Per Year
- Only one (a)(6) loan at a time: Under Section 50(a)(6)(K), you can have only one Section 50(a)(6) home equity loan or HELOC secured by your homestead at any given time (alongside permissible liens like your original purchase mortgage). You cannot stack a new HELOC on top of an existing cash-out refinance unless the new loan pays off the old (a)(6) lien.
- The 12-month (365-day) spacing rule: Under Section 50(a)(6)(M)(iii) and 7 TAC §153.14, a new Texas home equity loan cannot close before the first anniversary (minimum 365 days) of the closing date of any previous Section 50(a)(6) loan on the same homestead. This one-year wait applies even if you already paid off and closed the earlier equity loan. The only exceptions are a formal refinance to cure a constitutional defect or an oath-supported request by the owner due to a presidentially or gubernatorially declared state of emergency covering the area.
Consent of Every Owner and Every Spouse
Under Section 50(a)(6)(A) and 7 TAC §153.2, a Texas home equity lien requires the voluntary written consent of each owner and each owner's spouse. Your spouse must sign and consent even if the home is your separate property and your spouse is not on the title or the loan note. If any owner or spouse does not consent, the lender forfeits all principal and interest unless that person later consents.
In-Person Closing at an Authorized Office Only
Under Section 50(a)(6)(N) and 7 TAC §153.15, a Texas home equity loan, HELOC, or cash-out refinance may close only at the permanent physical office of the lender, an attorney at law, or a title company. You cannot close at your dining room table or with a mobile notary visiting your homestead. If you use a power of attorney to have someone sign closing documents on your behalf, the power of attorney itself must also be signed at the permanent physical office of a lender, an attorney, or a title company.
Non-Recourse Protection and Court-Ordered Foreclosure
The Texas Constitution gives home equity borrowers two important protections:
- Non-recourse debt: Under Section 50(a)(6)(C), a Texas home equity loan is without recourse for personal liability against each owner and spouse, unless the loan was obtained by actual fraud. That means if the loan goes into default and the home sells at foreclosure for less than the loan balance, the lender cannot sue you personally for a deficiency judgment.
- Judicial foreclosure only: Under Section 50(a)(6)(D), a lender cannot foreclose a Texas home equity lien without first obtaining a court order.
Additional Borrower Protections
Every Section 50(a)(6) loan also includes these constitutional safeguards:
- No prepayment penalties for paying the loan off early.
- No balloon payments on closed-end equity loans; payments must be substantially equal, due no more often than every 14 days and at least monthly, begin within two months of closing, and cover at least the accrued interest.
- No cross-collateralization: The loan cannot be secured by any collateral other than your homestead.
- No acceleration for home value drops: The lender cannot demand immediate payoff just because your home's market value declines.
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How Does a HELOC Work in Texas? (Section 50(t) Rules)
A Texas Home Equity Line of Credit—or Texas HELOC—is an open-end revolving credit line governed by both Section 50(a)(6) and Section 50(t) of the Texas Constitution. While a closed-end home equity loan gives you a single lump sum at closing, a Texas HELOC lets you request advances, repay principal, and borrow again during the draw period.
Because a Texas HELOC is a Section 50(a)(6) loan, all of the rules above—the 80% combined LTV cap, the 2% fee cap, the 12-day wait, the one-per-year limit, spousal consent, and office-only closing—apply in full. In addition, Section 50(t) imposes specific rules on how a HELOC works in Texas:
- $4,000 minimum draw rule: Under Section 50(t)(2), every individual advance you request under a Texas HELOC must be at least $4,000. You cannot take out $500 or $1,500 at a time.
- No credit cards, debit cards, or unsolicited checks: Under Section 50(t)(3), you cannot access a Texas HELOC using a credit card, debit card, or similar device, or by writing an unsolicited preprinted check. Instead, you request an advance of $4,000 or more directly from the lender.
- No per-draw fees: Under Section 50(t)(4), all fees must be charged when the HELOC is first established. A lender cannot charge a transaction fee or draw fee when you request an advance later.
- 80% cap on every advance (and the 2017 repeal of the 50% rule): Under Section 50(t)(5) and 7 TAC §153.86, the maximum credit limit plus all other homestead debt at closing cannot exceed 80% of fair market value, and each individual advance is tested against that 80% cap. Before the November 2017 constitutional amendment, Texas barred new HELOC draws once the balance exceeded 50% of the home's value—a restriction voters repealed in 2017, allowing borrowers to draw all the way up to their 80% limit.
- Draw period vs. repayment period payments: Under Section 50(t)(8) and 7 TAC §153.88, payments are due at least monthly (and no more often than every 14 days). During the draw period, each payment must at least equal the accrued interest, which means interest-only payments are allowed (and if your balance is zero, no payment is due). Once the draw period ends and the repayment period begins, you can no longer take advances and your payments must be substantially equal installments.
- No unilateral changes: Under Section 50(t)(7), the lender cannot unilaterally amend the terms of your HELOC.
Texas Cash-Out Refinance Rules: Why It Counts as a Home Equity Loan
Many homeowners do not realize that in Texas, a cash-out refinance on your homestead is legally a Section 50(a)(6) home equity loan. In fact, the Texas Department of Savings and Mortgage Lending reports Texas home equity loans under the label "Home Equity Loan (Cash-out Refinance)."
Under Section 50(e) of the Texas Constitution, if you refinance your existing first mortgage and take any additional cash out beyond the payoff of valid homestead liens and reasonable refinancing costs (which 7 TAC §153.41 confirms may include tax and insurance escrow reserves), the new loan must be made as a Section 50(a)(6) loan to be a valid lien on your homestead (limited exceptions apply when the extra funds go only to property taxes, an owelty lien, or home improvements).
That means a first-lien Texas cash-out refinance must obey every Section 50(a)(6) rule:
- Your total new loan amount plus any other homestead liens cannot exceed 80% of your home's fair market value. If you are comparing FHA Loans in Texas or VA Loans in Texas for a cash-out, ask how the Texas 80% cap applies to your homestead.
- Capped fees cannot exceed 2% of the new loan principal (excluding the appraisal, licensed survey, state base title policy premium, qualifying title exam, interest, and bona fide discount points).
- You must wait at least 12 calendar days after application and receipt of the Section 50(g) notice, plus 1 business day after the final itemized disclosure, and you have at least 3 days to rescind after closing.
- You cannot close another home equity loan or HELOC until the first anniversary of the closing date.
(Note: These homestead rules apply to your primary residence. If you are pulling cash out of a non-homestead rental or investment property, explore a Texas DSCR Cash-Out Refinance or Texas DSCR Loans, which are not subject to Section 50 homestead restrictions.)
Refinancing a Home Equity Loan Into a Regular Mortgage: Section 50(f)(2)
Before the 2017 amendment, there was no option to refinance a home equity loan into a non-equity loan. Today, thanks to the 2017 constitutional amendment adding Section 50(f)(2), you can refinance debt that includes a Section 50(a)(6) loan (including a cash-out refinance) into a regular non-equity rate-and-term refinance under Section 50(a)(4) if you meet all four conditions:
- One-year wait: The refinance closes no earlier than one year after the original home equity loan closed.
- No cash out: No additional funds are advanced other than what is needed to pay off valid Section 50(a)(1)–(a)(7) homestead debt and the actual costs and reserves required by the lender to refinance.
- 80% LTV limit: The new refinanced principal plus all other homestead liens does not exceed 80% of the homestead's fair market value on the refinance date.
- Special 12-day statutory notice: The lender provides a specific constitutional notice on a separate document no later than the 3rd business day after you apply and at least 12 calendar days before closing.
That notice warns you that by converting your home equity loan into a regular non-equity refinance, you give up two home equity protections—meaning the new loan allows personal liability (recourse) and foreclosure without a court order. The notice also points out that a home equity loan may carry a higher interest rate and higher closing costs.
Comparing Your Options: Texas HELOC vs. Home Equity Loan vs. Cash-Out Refinance
All three options below are governed by Section 50(a)(6) when secured by your Texas homestead, so they share the same 80% combined LTV cap, 2% fee cap, 12-day waiting period, and one-loan-per-year limit. Here is how their structure and day-to-day mechanics compare:
| Feature | Texas HELOC (§50(t)) | Texas Home Equity Loan (§50(a)(6)) | Texas Cash-Out Refinance (§50(a)(6)) |
|---|---|---|---|
| Lien Position | Can sit behind your existing purchase-money first mortgage | Can sit behind your existing purchase-money first mortgage | Replaces your first mortgage with a new first lien |
| Keeps Your Existing First Mortgage Rate? | Yes | Yes | No (replaces your first mortgage) |
| How You Receive Funds | Revolving line of credit; each draw must be at least $4,000 | Single lump sum | Single lump sum |
| Card or Checkbook Access? | Prohibited by Texas Constitution | Not applicable (lump sum) | Not applicable (lump sum) |
| Repayment Structure | Interest-only allowed during draw period; substantially equal payments during repayment period | Substantially equal installments of principal and interest (no balloon) | Substantially equal installments of principal and interest (no balloon) |
| Maximum Combined LTV | 80% of fair market value | 80% of fair market value | 80% of fair market value |
| Fee Cap | 2% of original principal (excluded items do not count); fees charged only when the line is set up, none per advance | 2% of original principal (excluded items do not count) | 2% of original principal (excluded items do not count) |
| Non-Recourse & Court-Order Foreclosure? | Yes | Yes | Yes (until refinanced under §50(f)(2)) |
If you or your spouse are 62 or older and want to access home equity without a monthly principal and interest payment, you can also compare a Section 50(a)(7) reverse mortgage in our guide to Texas Reverse Mortgages. If you are planning major renovations, you can also read our guide to FHA 203(k) Loans in Texas.
Check Your Texas HELOC Eligibility
Texas Homestead Size Limits and Agricultural Homesteads
Because Texas home equity rules apply specifically to your homestead, it helps to know how Texas defines homestead acreage and agricultural use:
- Urban homestead size limit: Under Article XVI, Section 51 of the Texas Constitution and Texas Property Code §41.002, an urban homestead can include up to 10 acres of one or more contiguous lots. Under the Property Code, a homestead is considered urban if it is located within a municipality, its extraterritorial jurisdiction (ETJ), or a platted subdivision and is served by police protection, fire protection, and at least three of five municipal services (electric, natural gas, sewer, storm sewer, or water).
- Rural homestead size limit: Under the Texas Property Code, a rural homestead is capped at up to 200 acres for a family or up to 100 acres for a single adult, in one or more parcels.
- Agricultural homesteads are now eligible: From 1997 until 2017, the Texas Constitution prohibited home equity loans on homesteads designated for agricultural use (except property used primarily for milk production). The November 2017 constitutional amendment repealed Section 50(a)(6)(I) entirely, so an agricultural homestead is now treated the same as any other Texas homestead for a home equity loan or HELOC.
Step-by-Step: The Texas Home Equity and HELOC Process
Here is what the timeline looks like from start to funding on a Texas home equity loan, HELOC, or cash-out refinance:
- Check your equity and 12-month eligibility: Estimate 80% of your home's current market value and subtract all existing homestead liens to see your maximum borrowing room, and confirm the first anniversary has passed since you closed any prior Section 50(a)(6) loan on the home.
- Submit your application and receive the Section 50(g) Notice: Once you apply and receive the separate constitutional Section 50(g) notice, the 12-calendar-day waiting clock starts on the next calendar day after the later of those two events.
- Appraisal, title work, and underwriting: An appraisal or evaluation supports the fair market value that you and the lender will acknowledge in writing at closing.
- Receive your final itemized disclosure: At least one business day before closing, you receive a copy of your loan application (if not already provided) and the final itemized disclosure of the actual fees, points, interest, costs, and charges.
- Close in person at an authorized office: On or after the 12th calendar day (and at least one business day after receiving your final itemized disclosure), you and your spouse sign the closing documents and the written acknowledgment of fair market value at the permanent physical office of the lender, an attorney, or a title company.
- Use your rescission window, then access funds: You have at least 3 days after closing to cancel. Ask your lender when funds will be available; on a Texas HELOC, each advance you request must be $4,000 or more.
Next Steps: Check Your Texas HELOC or Home Equity Options
Texas home equity laws are designed to protect your homestead, your equity, and your family from predatory terms and personal deficiency judgments. Once you understand the 80% combined LTV cap, the 2% fee limit, the $4,000 minimum HELOC draw rule, and the 12-day waiting period, tapping your home's equity is a straightforward, predictable process.
Whether you want a flexible Texas HELOC, a fixed-payment home equity loan, or a cash-out refinance—or you want to compare other Texas Home Loan Options—our team can help you review your equity, compare structures, and see what you qualify for today.
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