What is a Texas cash-out refinance under Section 50(a)(6)?

A Texas cash-out refinance is a home equity loan under Article XVI, Section 50(a)(6) of the Texas Constitution. All loans against the homestead combined cannot exceed 80 percent of fair market value, the loan cannot close until 12 days after the later of application or notice, and fees are capped at 2 percent.

Why this lives in the constitution

Most states regulate home equity lending by statute, which a legislature can change in a session. Texas put its homestead protections in the state constitution, and for most of the state's history it did not permit home equity lending against a homestead at all. What exists today is a carefully bounded exception, and the boundaries are the reason a Texas cash-out looks different from a cash-out anywhere else.

The practical consequence for a homeowner: some of the terms below are not negotiable with a lender, because the lender cannot waive them either.

The rules, plainly

80 percent loan-to-value ceiling. All loans secured by the homestead, combined, cannot exceed 80 percent of the home's fair market value at closing. At least 20 percent equity must remain in the property. This is a combined test — a first lien plus a second lien plus the new loan all count toward the same 80 percent.

A 12-day waiting period. The loan cannot close until at least 12 days after the later of two events: the date of the application, or the date the borrower receives the required notice. This is a cooling-off period built into the process. It is the most common reason a Texas cash-out takes longer to close than a borrower expects, and it cannot be compressed by paying a rush fee.

A 2 percent cap on fees. Fees charged in connection with the loan cannot exceed 2 percent of the loan principal — excluding the appraisal fee, the land survey fee, the title insurance premium and title search or examination charges. Those four sit outside the cap.

Generally non-recourse. The lender generally cannot pursue the borrower personally for a deficiency. If the home is foreclosed and the sale does not cover the balance, the borrower is generally not on the hook for the shortfall. This is a meaningful protection and it is a real reason some Texas borrowers choose this product knowingly.

One at a time. Only one Section 50(a)(6) loan may be secured by the homestead at any given time.

12 months between closings. At least 12 months must pass between home equity closings.

Sources: Rocket Mortgage and Hurst Lending.

A Texas HELOC on a homestead is also a 50(a)(6) loan

This surprises people who assume a line of credit is a lighter-touch product. A home equity line of credit secured by a Texas homestead is a Section 50(a)(6) loan and carries the same limits — the same 80 percent combined ceiling, the same notice and waiting period, the same one-at-a-time rule.

That last point has a specific consequence worth spelling out. An open HELOC on the homestead is a 50(a)(6) loan. So a homeowner with a HELOC in place who wants a 50(a)(6) cash-out refinance generally has to deal with the existing line first, because only one such loan can be secured by the homestead at a time. Anyone planning a refinance while carrying an open equity line should raise it with the lender at application, not at underwriting.

The math the 80 percent rule actually produces

The ceiling is on the combined balance against the homestead, which means the available cash is the difference between 80 percent of value and everything already owed.

A home appraised at $500,000 has an 80 percent ceiling of $400,000. If the existing mortgage balance is $340,000, the maximum new combined debt is $400,000 — and the gross proceeds before costs are $60,000, not $160,000. Subtract closing costs from there.

Two things follow. First, a borrower with a large existing balance may find there is no usable cash-out at all, regardless of how much the house appreciated. Second, the appraisal is the whole deal. Fair market value at closing sets the ceiling, and the borrower does not get to pick the number. A cash-out plan built on a hoped-for value is a plan with one input nobody controls.

What this does not cover

Investment property. Section 50(a)(6) governs the homestead. A rental property held as an investment in Texas is not the homestead and is not governed by these rules — which is why investor cash-out strategies are structured on the investment side. The limits there come from the lender's own loan-to-value, seasoning and reserve requirements, not from the constitution. See what is the BRRRR method, and does it work in Texas.

Rate-and-term refinances. A refinance that only changes the rate or the term, with no cash to the borrower, is a different transaction from a 50(a)(6) cash-out. Whether a particular restructuring counts as cash-out, and whether a loan that was once a 50(a)(6) loan keeps that character when it is refinanced later, are questions for the lender and, where the answer matters legally, a Texas real estate attorney.

Homestead character itself. Whether a specific property is the borrower's homestead — including in a house-hack, a property held in an entity, or a home the borrower moved out of — is a legal question, not a form field.

Questions to put to a lender at application

What is the combined balance against the homestead today, and what does 80 percent of the expected appraised value leave available?
When does the 12-day clock start for this loan, and what date does that produce for closing?
Which fees fall inside the 2 percent cap and which are the excluded appraisal, survey, title premium and title search charges?
Is there an existing home equity loan or HELOC on the property, and what has to happen to it?
Was there a home equity closing on this homestead in the last 12 months?

A lender is the right professional for qualification, rates, products and whether a specific transaction qualifies. Nothing on this page is a loan approval or a rate quote, and rates and lender overlays change.

Questions about a specific property?

Call or text 830-446-3847 · Email heath.shepard@kw.com

This page describes Texas Constitution Article XVI, Section 50(a)(6) requirements as of September 2026 and is not lending or legal advice. A lender determines qualification, terms and whether a specific loan is a 50(a)(6) transaction.