Texas Law · 9 min read
Texas is the only state that writes home-equity borrower protections directly into its constitution. If you're taking cash out of your Texas homestead — by cash-out refinance or HELOC — these rules govern the transaction. Here's each one in plain English, and what it actually means for your loan.
Written and reviewed by Jonathan Sarver, Licensed Mortgage Loan Officer · NMLS #993872
Last updated July 23, 2026
Key takeaways
Section 50(a)(6) is the part of Article XVI of the Texas Constitution that governs loans secured by the equity in your primary residence — setting borrower protections that no other state has.
Most mortgage rules come from federal regulation or lender guidelines. Texas home equity law is different: it lives in the state constitution itself, which is why it is unusually rigid and why lenders treat it with more caution than almost any other requirement.
The history explains the strictness. Texas prohibited home equity lending entirely until 1997. When voters finally authorized it by constitutional amendment, they wrapped it in an extensive set of borrower protections designed to make it hard for a family to lose their homestead to an equity loan. Those protections are what you are reading about here.
The practical consequence: if a Texas lender tells you a home-equity transaction has to work a certain way, they usually aren't being difficult. They're following constitutional requirements that carry real penalties for getting wrong.
When does it apply to you?
Section 50(a)(6) applies when you borrow against the equity in your Texas homestead — your primary residence. That covers cash-out refinances and home equity lines of credit. It does not cover a purchase loan, a rate-and-term refinance with no cash out, or a loan on an investment property.
All debt secured by your Texas homestead — first mortgage plus any home equity loan or line — cannot exceed 80% of the home's fair market value.
This is the rule people feel first, because it directly determines how much you can borrow. It is a combined limit, not a limit on the equity loan alone: your existing mortgage balance counts against it.
The arithmetic is straightforward. Take the home's fair market value, multiply by 80%, then subtract what you still owe. What's left is the maximum you could access, subject to normal qualifying.
How the 80% cap works
| Home value | 80% ceiling | Existing mortgage | Maximum available |
|---|---|---|---|
| $400,000 | $320,000 | $250,000 | $70,000 |
| $500,000 | $400,000 | $300,000 | $100,000 |
| $650,000 | $520,000 | $300,000 | $220,000 |
| $800,000 | $640,000 | $500,000 | $140,000 |
Illustrative only. Fair market value is established by appraisal, and final amounts remain subject to credit approval and program guidelines.
A Texas home equity loan cannot close sooner than 12 days after you apply and receive the required notice, and you have 3 business days after closing to cancel without penalty.
Texas builds deliberate delay into the process. You must receive a written 'Notice Concerning Extensions of Credit' — a plain-language summary of your rights — and at least 12 days must pass between that point and closing.
After closing, a further 3-business-day right of rescission applies. You may cancel the transaction entirely, for any reason or none, and funds generally are not disbursed until that window closes.
Plan around this. If you need funds by a specific date, count backward and add margin. A legitimate lender cannot compress this timeline, and any lender who offers to should be treated as a serious warning sign.
A Texas home equity loan must close at the permanent office of a lender, an attorney, or a title company — never at your home.
This requirement exists to prevent pressure closings at a borrower's kitchen table. It is a small rule with a clear purpose, and it is absolute.
It also has a practical effect worth knowing: the flexible mobile-notary or at-home signing that is common for ordinary refinances is not available for a Texas home equity closing. Budget the trip.
Lender fees to originate a Texas home equity loan are capped at 2% of the loan amount, excluding certain third-party charges.
Texas limits what a lender can charge to make a home equity loan. The cap was reduced from 3% to 2% effective January 1, 2018, and at the same time specific third-party costs were carved out of the calculation.
Why the exclusions matter
Because appraisal, survey, and title charges sit outside the cap, your total closing costs can exceed 2% of the loan amount without anything being improper. The cap governs what the lender charges to originate, not the whole settlement statement.
Only one Section 50(a)(6) loan may be secured by your homestead at any time, and at least 12 months must pass between home equity closings on the same property.
You cannot stack a home equity loan on top of an existing one. If you already have a 50(a)(6) loan and want a new one, the existing loan must be paid off as part of the new transaction.
The 12-month spacing rule matters for planning. If you closed a cash-out refinance eight months ago and now want a HELOC, you will need to wait — regardless of how much equity you have or how strong your credit is.
A Texas home equity loan is generally non-recourse: absent fraud, the lender's remedy is against the home itself, not a personal judgment against you.
This is one of the strongest protections in the section and one of the least understood. In many states, if a foreclosure sale doesn't cover the balance, the lender can pursue you personally for the shortfall — a deficiency judgment. Texas home equity law generally forecloses that path.
It does not make the loan risk-free. You can still lose the home. But your exposure is generally limited to the property securing the loan rather than the rest of your assets.
Texas home equity lines of credit carry additional mechanics, including a $4,000 minimum per advance and a prohibition on credit-card access to the line.
A line of credit secured by a Texas homestead is still a 50(a)(6) transaction, so everything above applies. Texas then adds line-specific rules.
After 12 months, Texas law provides a path under Section 50(f)(2) to refinance a home equity loan into a standard rate-and-term mortgage if specific conditions are met.
Once a loan is a 50(a)(6) loan, it historically carried that character permanently — 'once a home equity loan, always a home equity loan.' A 2017 constitutional amendment changed that, creating a route out.
If at least a year has passed, no new cash is taken, and the other statutory conditions are satisfied, the loan can be refinanced into a conventional rate-and-term mortgage. That can matter: conventional refinances price differently and are not bound by the 80% cap going forward.
If you have an older Texas home equity loan and haven't reviewed it recently, this is worth a conversation. Borrowers frequently don't know the option exists.
No. A rate-and-term refinance — where you change your rate or term but take no cash out — is not a Section 50(a)(6) transaction, and none of these rules apply. The 80% cap, 12-day waiting period, and fee cap only attach when you are pulling equity out of your homestead.
Total debt secured by your homestead cannot exceed 80% of the home's fair market value. So your maximum is 80% of the appraised value minus your existing mortgage balance, subject to credit approval and program guidelines. On a $500,000 home with a $300,000 mortgage, the ceiling is $400,000, leaving up to $100,000 of potential access.
Texas requires a minimum 12 days between your application with the required notice and closing, plus a 3-business-day right to cancel after closing before funds disburse. These are constitutional borrower protections, not lender delays, and no legitimate lender can shorten them.
No. Only one Section 50(a)(6) loan may be secured by your homestead at a time. If you want a new one, the existing loan must be paid off in the new transaction. In addition, at least 12 months must pass between home equity closings on the same property.
No. Section 50(a)(6) protects the homestead — your primary residence. Equity lending against investment property is a different product governed by different terms, generally with fewer constitutional restrictions and different pricing.
Texas requires every advance from a home equity line of credit to be at least $4,000. The line also cannot be accessed by credit card or a similar device. This makes a Texas HELOC well suited to larger, planned expenses rather than day-to-day spending.
Yes. Since a 2017 constitutional amendment, Section 50(f)(2) allows a home equity loan to be refinanced into a standard rate-and-term mortgage once at least 12 months have passed, no new cash is taken, and other statutory conditions are met. Many borrowers with older home equity loans don't realize this option exists.
Jonathan Sarver
Licensed Mortgage Loan Officer · NMLS #993872 · Licensed in Texas
Hill Country Mortgages, Lakeway TX. In mortgages since 2012. Questions about how this applies to your situation? Get in touch.
Keep reading
Ready when you are
Guides explain the rules. A licensed Texas loan officer tells you how they apply to your actual numbers.
Talk to a loan officerThis is not a commitment to lend. All loans subject to credit approval, income and asset verification, and property appraisal. Rates and terms vary and are not guaranteed.