Most mortgage rules come from lenders, or from Fannie Mae, or from a federal regulator. If you don't like one, you can usually find someone with a different overlay.
Texas home equity rules are not like that. They are in the state constitution. No lender can waive them, price around them, or find you an exception, and any lender who tells you otherwise is telling you something that should end the conversation.
They're called Section 50(a)(6) rules, and if you are thinking about pulling cash out of a Texas home, there are four things to understand before you start.
1. Eighty percent, and not a dollar more
A Texas cash-out refinance is capped at 80% of your home's fair market value. You must leave at least 20% equity in the property. This is confirmed in Fannie Mae's own selling guide, which says the limit applies "notwithstanding any conflicting provisions" — meaning it overrides every other loan-to-value rule that might otherwise be more generous.
In much of the country you can pull out more. Not here.
2. Lender fees are capped at 2%
Certain fees on a Texas home equity loan cannot exceed 2% of the loan amount. Appraisals, surveys, title insurance and discount points sit outside the cap, but the lender's own fees are limited by law.
This is genuinely consumer-protective and most Texans have no idea it exists.
3. Once a year, and not right after you buy
You can do a Texas cash-out once every twelve months. You also generally can't do one within the first six months of owning the home.
So a cash-out is not a tap you can turn on whenever the market moves. If you're planning to use equity twice in a year, the plan doesn't work, and it's better to know that now.
4. The part that actually matters
Here is the one I wish more people heard before their first cash-out instead of after.
Once a property has had a Texas cash-out, the 80% cap follows that property forever.
Not you — the house. Every future refinance on that home is treated as a Texas home equity loan, even a straight rate-and-term refinance where you take no cash at all, even years later, even with a different lender. The industry shorthand is "once a Texas cash-out, always a Texas cash-out," and it is not a saying, it is how the loan is classified for the life of the property.
Practically, that means if you cash out now and rates improve substantially later, you refinance under an 80% ceiling rather than the higher limit a normal refinance would allow. If your equity is thin at that point, you may not be able to refinance at all.
That is not a reason to never do one. It is a reason to do it deliberately.
A few other things Texas does differently
- Agricultural land is generally out. If your homestead carries an agricultural exemption, it is usually ineligible — with a narrow exception for working dairy farms, which is exactly the kind of oddity you'd expect from a constitutional provision.
- Homestead acreage is limited — ten acres for an urban homestead, up to a hundred for a rural one.
- Only the homestead counts. The appraisal can't fold in adjacent land that isn't part of it.
So should you do one?
The honest answer is that it depends on what the money is for and what it costs you to get it — and "what it costs" includes giving up flexibility on every future refinance of that house.
Debt consolidation at a materially lower rate, a renovation that adds value, or capital for something that earns more than the loan costs: those can be sound. Pulling equity to cover a shortfall that will recur next year is usually the expensive version of a problem you haven't solved yet.
Sometimes a second lien is the better answer — it leaves your first mortgage alone and doesn't stamp the property. Sometimes it isn't. That comparison takes about fifteen minutes and it's worth doing before you commit.
If you're weighing one, bring me the numbers. I'll show you both paths and tell you which one I'd pick, including if the answer is neither.