Texas home equity loans: Section 50(a)(6), HELOCs, and second liens
How the Texas 80% combined-lien cap, 12-day period, spouse consent, fees, and HELOC rules affect a home-equity decision.
A Texas home equity loan is credit secured by equity in a Texas homestead under Section 50(a)(6) of the Texas Constitution. A closed-end loan provides a lump sum; a HELOC allows repeated advances under its terms. If an existing first mortgage remains, the new debt is generally a second mortgage, but neither structure automatically produces the lowest payment or total cost.
Home equity loan Texas overview
A closed-end home equity loan advances a known amount at closing and may use a fixed or adjustable rate. A home equity line of credit is open-end: the borrower can draw, repay, and reborrow under the line's terms, and the rate is usually variable. Some HELOCs offer a fixed-rate conversion feature, but that is product-specific.
Leaving a first mortgage in place can preserve its rate and term, but the new equity debt brings another payment, closing costs, lien risk, and possibly a variable rate. A cash-out refinance instead replaces the existing first mortgage. The better structure depends on the full cost and risk of both proposals, not on the first-mortgage rate by itself.
If preserving favorable first-mortgage terms is the main concern, review the low-rate first mortgage debt consolidation scenario before replacing the entire balance.
Both home equity loans and HELOCs use the home as collateral. If the borrower does not meet the loan terms, foreclosure is possible. The requested amount should be weighed against the payment under realistic rate and repayment assumptions, not only the equity that appears available.
Texas Section 50(a)(6) guardrails
At origination, the new loan plus the principal balances of all other liens against the homestead may not exceed 80% of the home's fair market value. That 80% figure is a ceiling, not a guaranteed loan amount; lender underwriting, existing liens, costs, property eligibility, credit, and income can reduce what is available.
The closing cannot occur before 12 days after the borrower submits the application or 12 days after receiving the required constitutional notice, whichever is later. Only one Section 50(a)(6) loan may be secured by the home at a time, and another generally cannot close on the same property until one year after the prior equity-loan closing, subject to the narrow declared-emergency exception in the notice.
Each owner and each owner's spouse must consent. Section 50 also limits where the loan may close, permits prepayment without penalty, and generally caps fees and charges to make the loan at 2% of the loan amount while excluding specified appraisal, survey, title-premium, title-endorsement, and title-examination charges. The lender, title company, final disclosures, and current law control a particular file.
Terms to compare
How I compare Texas equity options
I can compare a closed-end home equity loan or HELOC with a cash-out refinance using the same file assumptions: amount needed, current first-mortgage balance and rate, new rate and payment, closing costs, fixed-versus-variable risk, repayment period, expected payoff timing, and total interest over the time the debt is expected to remain outstanding.
I also verify current lender and product availability for the specific property and file. Availability and terms remain lender-, property-, lien-history-, equity-, credit-, income-, and program-specific. Kellibrooke does not promise a particular home equity product or replace the lender and title company's review of constitutional compliance.
Primary sources and limits
The governing state source is Article XVI, Section 50 of the Texas Constitution. The Texas Office of Consumer Credit Commissioner publishes the current home-equity consumer disclosure and its 12-day waiting-period explanation.
The CFPB explains the home equity loan and HELOC distinction, HELOC payment and repayment risks, and provides a HELOC shopping booklet. The IRS explains the conditions and limits for a possible home-mortgage interest deduction in Publication 936. These sources are general guidance; the executed documents, current law, complete file, and applicable lender requirements control a specific transaction.
Texas home equity loan questions
What is a Texas home equity loan?
A Texas home equity loan is credit secured by equity in a Texas homestead under Section 50(a)(6) of the Texas Constitution. A closed-end home equity loan provides a lump sum. If an existing first mortgage remains in place, the new loan is generally a second mortgage. The home secures the debt, so failure to repay can lead to foreclosure.
What is the difference between a home equity loan and a HELOC in Texas?
A closed-end home equity loan pays a set amount as a lump sum and may have a fixed or adjustable rate. A HELOC is an open-end line that permits repeated advances and repayments under its terms and usually has a variable rate. Texas HELOCs also have additional constitutional rules, including a $4,000 minimum for each advance.
What is the 80% rule for Texas home equity loans?
At origination, the principal amount of a Texas home equity loan plus the principal balances of all other liens against the homestead may not exceed 80% of its fair market value. Existing liens and lender underwriting can make the usable amount lower, so 80% is a constitutional ceiling rather than a promised borrowing amount.
How does the Texas 12-day waiting period work?
The loan may not close before 12 days after the borrower submits the application or 12 days after the borrower receives the required constitutional notice, whichever is later. That is a legal minimum, not a closing-time promise; appraisal, title, underwriting, disclosures, and lender conditions can take longer.
Does a spouse have to consent to a Texas home equity loan?
The Texas constitutional disclosure states that the loan must be voluntarily created with the consent of each owner of the home and each owner's spouse. Title, homestead, marital-status, and signature questions should be resolved with the lender and title company for the actual file.
How often can you take out a Texas home equity loan?
Only one Section 50(a)(6) loan may be secured by the homestead at a time. If the same home secured that type of loan within the previous year, a new one generally may not close until one year after the earlier closing, subject to the narrow declared-emergency exception described in the constitutional notice.
What is the 2% fee cap on a Texas home equity loan?
Section 50(a)(6) generally caps fees and charges to make the loan at 2% of the loan amount, but the constitution excludes specified appraisal, survey, state base title-premium, title-endorsement, and title-examination charges from that cap. The final itemized disclosures and current law control the calculation.
Should I use a home equity loan, HELOC, or cash-out refinance?
Compare the amount and timing of the cash need, the existing first-mortgage balance and rate, both loans' payments and closing costs, fixed-versus-variable risk, term, future borrowing needs, and current lender availability. Keeping a low-rate first mortgage can help, but a second lien does not automatically produce the lowest payment or total cost.
Is Texas home equity loan interest tax-deductible?
It may be deductible only when IRS requirements are met. In general, the debt must be secured by a qualified home, the proceeds must be used to buy, build, or substantially improve the home securing the loan, the taxpayer must itemize, and applicable debt limits and other rules apply. A tax professional should evaluate the actual use of proceeds.
What happens when a HELOC draw period ends?
Borrowing generally stops and repayment follows the note's terms. Payments can increase significantly, and some plans can require a large or balloon payment. Draw-period payments are not universally interest-only, so compare the minimum-payment formula, repayment term, rate adjustment, conversion options, and any balloon feature in the actual HELOC disclosures.
Can a Texas home equity loan be refinanced?
Yes, but the path depends on the existing lien, the proposed new transaction, timing, equity, and current Texas requirements. Some refinances remain Section 50(a)(6) loans, while a refinance to a non-home-equity loan requires the conditions and disclosure in Section 50(f). The lender and title company must review the actual documents.
Does Kellibrooke offer Texas home equity loans or HELOCs?
Kellibrooke can compare a closed-end home equity loan or HELOC with a cash-out refinance and verify current lender and product availability for a specific file. Availability and terms depend on the lender, property, lien history, equity, credit, income, and current program rules; no particular home equity product is promised.
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