Texas · Home equity

Texas home-equity loans and HELOCs: the rules, plainly

Updated November 2026 · Every dollar figure is an example · Texas rules and limits change, check the current ones

In Texas a home-equity loan, a home-equity line of credit (HELOC) and a cash-out refinance are all the same thing to the constitution: a loan against the home you live in under Section 50(a)(6), so the 80% cap on total debt, the 2% cap on lender fees, the 12-day wait, closing at a lender, title or attorney office and the 3-day right to cancel apply to all three. A HELOC adds a few rules of its own: each draw must be at least $4,000, you cannot draw with a credit or debit card, the lender cannot charge a fee per draw, and you cannot draw past the 80% line. Which one fits depends on whether you want one lump sum at a fixed rate or a line you can use over time.

The three choices

	Cash-out refinance	Home-equity loan	HELOC
What it is	One new first mortgage that replaces your old one and pays you the difference	A second loan behind your mortgage, paid out all at once	A second loan behind your mortgage you can draw on and repay for a period
Your old mortgage	Replaced, at today's rate	Kept as is	Kept as is
Rate	Usually fixed	Usually fixed	Usually variable
Section 50(a)(6)?	Yes	Yes	Yes, plus Section 50(t)

Your closing papers will call a cash-out refinance a "home-equity loan" too. That is what Texas lenders call a loan made under Section 50(a)(6): money borrowed against your homestead for any reason other than buying it, improving it, paying its taxes, a reverse mortgage or refinancing a loan of one of those kinds.

Not legal advice — Texas home-equity rules are in the state constitution; check with your lender or a Texas attorney.

The rules all three share

80% of value, all debt together. Your first mortgage plus the new loan cannot exceed 80% of the home's fair market value at closing. If your home is worth $400,000 and you owe $280,000, the most new money is $40,000 (illustrative). This is lower than many other states allow.
Lender fees capped at 2% of the loan amount, not counting the appraisal, a licensed survey, the state base title premium and certain title reports. On a HELOC, lenders generally measure the cap against the credit line, and the fees can be charged only when the line is opened, never per draw.
12 days from application to closing, at least; your application and a final list of the fees one business day before, and copies of everything you sign at closing; closing only at the office of the lender, a title company or an attorney.
Three days to cancel after signing, with no money paid out until the window closes.
One at a time, one a year. You cannot have two 50(a)(6) loans on the home at once, and cannot close another until a year after the last.
No prepayment penalty, no personal liability. Pay it off early free; if things go wrong the lender's remedy is the house, not your other assets, absent fraud.

A detailed walk through each rule, including the 2018 changes and the 50(f)(2) way out, is in Texas cash-out refinance rules.

The HELOC's extra rules (Section 50(t))

Each draw at least $4,000. You cannot pull $500 for a repair; the minimum advance is set in the constitution.
No cards. A Texas HELOC cannot be drawn with a credit card, debit card or similar device. Checks or a transfer to your bank account are how you draw.
No per-draw fees. The lender may charge the closing-cost fees, inside the 2% cap, and nothing for each advance.
The 80% line applies to each draw. You cannot draw if it would take the total debt on the home above 80% of its value. (Before 2018 the draw limit was 50% of the value, with the 80% cap only at closing; voters raised the draw limit to 80% in November 2017.)
Regular payments. Payments are due on a regular schedule, no more often than every two weeks and at least monthly, and the payments after the draw period must repay the balance over the remaining term.

Which one fits

You have a low rate on your first mortgage and want a fixed sum. A home-equity loan keeps the old mortgage and its rate; a cash-out refinance would replace it at today's rate on the whole balance. Compare the blended cost, not just the two rates.
Your first mortgage rate is higher than today's and you want cash. A cash-out refinance can lower the rate on the whole loan and add the cash in one payment. Expect the Texas cash-out add-on to the rate; the Texas rate page explains it.
You want money over time, in chunks of at least $4,000. A HELOC. Mind the variable rate and the 80% draw line.
You need less than $4,000 or want to draw small amounts. A Texas HELOC cannot do it; a personal loan or a credit card may fit better, outside the house.

Worked example (illustrative)

A home worth $400,000 with a $240,000 first mortgage at a rate well below today's. The owner wants $60,000. The figures are made up to show the arithmetic.

Option	Total debt after	Within 80% ($320,000)?	What changes
Home-equity loan, $60,000	$300,000	Yes	Second payment at today's second-lien rate; first mortgage untouched
Cash-out refinance, $300,000	$300,000	Yes	One loan, whole $300,000 at today's cash-out rate; the old low rate is gone
HELOC, $80,000 limit	Up to $320,000	Only up to $80,000 drawn	Draw in $4,000+ chunks; variable rate

most new debt = 80% × value − existing debt = $320,000 − $240,000 = $80,000 · 2% fee cap on a $60,000 loan = $1,200

The fee cap is the number to check on the Loan Estimate of a small home-equity loan: 2% of $60,000 is $1,200 for everything the lender requires except the appraisal, survey and title premium, which does not leave much room, and some lenders decline small loans for that reason.

What a Loan Estimate tells you here

A home-equity loan and a cash-out refinance come with the same three-page Loan Estimate as any mortgage; a HELOC comes with its own disclosure instead, so comparing two HELOCs means comparing the margin over the index, the draw and repayment periods and the closing costs. For the two loans that have a Loan Estimate, the rules are identical whoever lends, so the comparison is the rate and Section A, and the Loan Estimate checker reads Section A for you.

Questions people ask

What is the minimum draw on a Texas HELOC?

$4,000. The Texas constitution, Section 50(t), says each advance on a home-equity line of credit must be at least that amount. It also bars drawing with a credit or debit card and bars a fee per draw.

How much can I borrow against my house in Texas?

Up to the point where all the debt on your home, your first mortgage included, is 80% of its fair market value. That cap applies to home-equity loans, HELOCs and cash-out refinances alike. On a $400,000 home with $240,000 owed, the most new money is $80,000 (illustrative).

Is a HELOC or a cash-out refinance better in Texas?

It depends on the rate on your first mortgage and whether you want a lump sum or a line. If your first mortgage rate is low, a home-equity loan or HELOC keeps it; a cash-out refinance replaces the whole loan at today's rate, with the Texas cash-out add-on. If your first mortgage rate is high, one new loan may cost less overall. Both are 50(a)(6) loans, so the waits, caps and cancel right are the same.

Quoted a Texas home-equity loan or cash-out and want a second look?

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The constitutional rules above are summarized from Article XVI, Section 50 of the Texas Constitution as we understand it in November 2026; it has been amended several times and may change again. Figures are illustrative and are not a loan offer, approval, commitment to lend, or Loan Estimate. Your actual rates and fees depend on qualification with lenders. comparemyloan does not negotiate with lenders, lock rates, or take loan applications. This page is general information, not legal or tax advice.