Texas 50(a)(6) Cash-Out Refinance Rules
The Texas Constitution restricts home equity loans in ways no other state does. Here's exactly what 50(a)(6) requires and what it prohibits.
Texas Section 50(a)(6) is a constitutional restriction on home equity loans and cash-out refinances added to Article XVI of the Texas Constitution in 1997 and amended several times since. It caps cash-out refinances on primary residences at 80% loan-to-value, requires a 12-day waiting period between application and closing, limits lender fees to 2% of the loan amount, prohibits more than one home equity lien on the property at a time, and applies only to homesteads. Why it matters: Texas is the only state with these restrictions written into its constitution. Because federal FHA and VA cash-out program requirements can't be reconciled with the 50(a)(6) restrictions, FHA cash-out and VA cash-out are effectively not available in Texas — only conventional 50(a)(6) refinances.
Key facts
- 80% maximum LTV on Texas cash-out refinances (total of all liens vs fair market value)
- 12-day waiting period between the lender's Section 50(g) notice and closing (calendar days)
- 2% cap on lender fees, applicable to loans originated on or after January 1, 2018 (excludes title insurance, third-party appraisal, survey, and bona fide discount points)
- Single-lien rule: only one home equity loan at a time per homestead
- Primary residence only (the homestead) — not allowed on second homes or investment properties
- FHA cash-out and VA cash-out effectively unavailable in Texas — federal program requirements conflict with 50(a)(6) restrictions
- Texas Limited Cash-Out refi — SJR 60 (2017 amendment, effective January 1, 2018) authorized 50(a)(6) loans to be refinanced into rate-and-term (non-50(a)(6)) loans under specific conditions, overriding the older "once-a-cash-out, always-a-cash-out" rule
- 3-business-day TILA rescission after closing applies on top of the 12-day pre-closing waiting period (12 CFR §1026.23)
Texas 50(a)(6) vs federal cash-out rules
How Texas-specific restrictions diverge from federal cash-out programs. The conflict is why FHA and VA cash-out generally aren't available in Texas.
| Feature | Texas Conventional 50(a)(6) | Federal FHA Cash-Out | Federal VA Cash-Out |
|---|---|---|---|
| Maximum LTV | 80% | 80% (typical) | Up to 100% in some scenarios |
| Waiting period | 12 calendar days | None constitutionally; standard underwriting timeline | None constitutionally; standard underwriting timeline |
| Lender fee cap | 2% of loan amount | No specific cap (lender-set, subject to QM) | No specific cap (lender-set, subject to QM) |
| Lien position | One home equity lien at a time on homestead | First lien | First lien |
| Property type | Primary residence (homestead) only | Primary residence only | Primary residence only (most cases) |
| Availability in Texas | Yes, the standard option | Effectively no — conflicts with 50(a)(6) | Effectively no — conflicts with 50(a)(6) |
| Rescission rights | 3-day TILA + pre-closing 12-day window | 3-day TILA | 3-day TILA |
Background and context
Texas didn't allow home equity loans at all until 1997. Before that, the Texas Constitution prohibited liens against the homestead for anything other than purchase money, taxes, and labor/materials for improvements. Texans could not borrow against their home equity, period. The 1997 amendment added Section 50(a)(6) to allow home equity loans for the first time, with the strict borrower protections still in place today: the 80% LTV cap, the 12-day cooling-off period, the 2% lender fee cap, and the single-lien rule.
The 2017 amendment (SJR 60, effective January 1, 2018) was the most significant overhaul. It cleaned up several technical issues, expanded the lender fee cap to include or exclude certain items more clearly, and most importantly created the Texas Limited Cash-Out refinance — a way to convert a 50(a)(6) loan into a rate-and-term refinance that's no longer subject to 50(a)(6) restrictions on future loans. Before 2018, the rule was strict: once you had a cash-out loan, every subsequent refinance had to be a 50(a)(6). After 2018, you can refinance into a non-50(a)(6) rate-and-term refi if you wait at least one year, take no new cash out, stay under 80% LTV, and the lender provides the prescribed Section 50(f)(2) notice.
The federal-vs-Texas conflict is structural. The Texas Constitution sets the floor for borrower protections at a level the federal FHA and VA programs weren't designed to operate within. FHA cash-out underwriting assumes certain LTV ceilings and disclosure timelines that don't fit the 50(a)(6) framework. VA cash-out allows up to 100% LTV in some scenarios, fundamentally incompatible with the 80% cap. The result: lenders don't originate FHA or VA cash-out loans in Texas. They originate conventional 50(a)(6) loans instead.
In practice: if you want to pull equity out of a Texas homestead, you have two paths. Conventional 50(a)(6) cash-out refinance (one lien, capped at 80% LTV) or a separate home equity loan / HELOC as a second lien (also subject to 50(a)(6)-derived restrictions). If you already have a 50(a)(6) loan and want to refinance without taking more cash out, the post-2018 Texas Limited Cash-Out path can take you out of the 50(a)(6) framework entirely going forward.
Sources & methodology
All citations verified against primary Texas constitutional and statutory sources as of May 11, 2026. This page is reviewed annually and after any legislative or constitutional change.
- Texas Constitution Article XVI — Section 50 (home equity loan restrictions)
- SJR 60 (85th Legislature, 2017) — constitutional amendment creating the Texas Limited Cash-Out refi
- Fannie Mae Selling Guide B5-4.1 — Texas Section 50(a)(6) Loans (eligibility and underwriting)
- Finance Commission of Texas — Home Equity constitutional references and interpretations
- Texas A&M Real Estate Research Center — What to Know About Home Equity Loans in Texas
- Texas Department of Savings and Mortgage Lending (SML)
- Truth in Lending Act / Regulation Z — 12 CFR §1026.23 (3-day right of rescission for home-secured refinances)
Questions I get about Texas 50(a)(6)
What is a Texas 50(a)(6) loan?
A Texas 50(a)(6) loan is a home equity loan or cash-out refinance on a Texas homestead (primary residence), governed by Article XVI Section 50(a)(6) of the Texas Constitution. The provision was added in 1997 and amended several times since. It imposes Texas-specific restrictions that don't exist in any other state: 80% LTV cap, 12-day waiting period, 2% lender fee cap, single-lien rule, and homestead-only restriction.
What's the maximum LTV on a Texas cash-out refinance?
80% of the homestead's fair market value. The total of all liens against the property cannot exceed 80% LTV at closing. This applies even on loans where the borrower wants to take less cash out than would otherwise be allowed by underwriting.
Why is the 12-day waiting period required?
The Texas Constitution requires that the loan not close before the 12th day after the lender provides the borrower with written notice (the "Notice Concerning Extensions of Credit Defined by Section 50(a)(6)") on a separate document. The waiting period gives the borrower time to review terms and rescind without consequence.
Can I do an FHA cash-out refinance in Texas?
No, in practice. The federal FHA cash-out refinance program's underwriting, disclosure, and origination requirements can't be reconciled with the Texas Constitution's 50(a)(6) restrictions: the 80% LTV cap conflicts with FHA's higher LTV ceilings; the 12-day waiting period and 2% fee cap don't fit the FHA process. Lenders generally don't originate FHA cash-out in Texas. Conventional 50(a)(6) cash-out is the workable option.
Can I do a VA cash-out refinance in Texas?
No, for the same reason. The federal VA cash-out refinance program requires up to 100% LTV in some scenarios and follows VA-specific disclosure and fee rules. Those can't coexist with Texas 50(a)(6) restrictions. VA purchase loans, VA rate-and-term refinances, and the VA IRRRL streamline are all available in Texas; VA cash-out generally is not.
Can I refinance my 50(a)(6) loan into a non-cash-out (rate-and-term) refinance?
Yes, after the 2017 amendment (Texas SJR 60, effective January 1, 2018). The amendment created the "Texas Limited Cash-Out" refinance, which allows a 50(a)(6) loan to be refinanced into a non-50(a)(6) rate-and-term refi if specific conditions are met: at least one year since the original 50(a)(6) closed, no new cash out, total loan amount not exceeding 80% LTV, and lender provides a separate Section 50(f)(2) notice. Before 2018, the rule was "once-a-cash-out, always-a-cash-out."
Does 50(a)(6) apply to second homes or investment properties?
No. The Texas Constitution's homestead protections apply only to the borrower's primary residence (the homestead). Cash-out refinances on second homes and investment properties in Texas follow standard federal and lender requirements without the 50(a)(6) restrictions.
What fees count toward the 2% lender fee cap?
Fees paid to the lender or to a third party for the lender's benefit count toward the cap. Excluded: title insurance premiums, appraisal fees paid to an unaffiliated appraiser, survey fees, and bona fide discount points used to buy down the rate. Lenders track this carefully because any violation can give the borrower the right to cure or to recover.
Can I get a HELOC in Texas?
Yes, but Texas HELOCs (home equity lines of credit) on primary residences are subject to similar 50(a)(6)-derived restrictions: 80% combined LTV cap, single-lien rule, homestead-only, and the 12-day waiting period for the initial draw setup. HELOCs on second homes and investment properties don't have these restrictions.
What happens if a lender violates 50(a)(6)?
Section 50(a)(6) provides borrowers with significant remedies, including the right to require the lender to cure the violation, and in some cases, forfeiture of all principal and interest. Lenders monitor 50(a)(6) compliance closely because the remedies are unusually borrower-favorable compared to federal mortgage law.
How does the 12-day cooling-off period work?
Day 1 starts when the lender delivers the Section 50(g) notice to the borrower (the prescribed "Notice Concerning Extensions of Credit"). The loan cannot close before day 12. The notice must be on its own separate document, not embedded in other paperwork. Lenders generally count calendar days, not business days.
How do I rescind a Texas cash-out loan?
Two separate rescission rights apply. First, the federal Truth in Lending Act (Reg Z, 12 CFR §1026.23) gives the borrower 3 business days after closing to rescind any home-secured refinance. Second, the Texas Constitution itself provides additional borrower protections during the pre-closing 12-day waiting period — the borrower can simply not close. To exercise the post-closing TILA rescission, deliver written notice to the lender within the 3-business-day window.
Cash-out refi in Texas? Let's run the numbers.
Send me your scenario. I'll tell you exactly what 50(a)(6) allows for your file and whether a second lien or HELOC is a better fit than a full cash-out refi.