In 2025, Texas homeowners are sitting on record levels of home equity thanks to years of rising property values. For many, a cash-out refinance offers a strategic way to tap into that equity—whether to fund renovations, consolidate debt, or invest in new opportunities. BD Nationwide can help you find the best lenders offering Texas cash out refinances, HELOCs and home equity loans online.
Texas Cash-Out Refinance Rules and Requirements in 2025
But unlike other states, Texas has unique laws and restrictions that govern how cash-out refinancing works. This guide breaks down everything you need to know about Texas cash-out refinance rules, eligibility requirements, and how to navigate the process successfully.
What Is a Cash-Out Refinance in Texas?
A Texas cash-out refinance replaces your existing mortgage with a new, larger loan. The difference between the old loan balance and the new loan amount is paid to you in cash. Even in Texas, you can use this money for:
- Home improvements
- Debt consolidation
- Education expenses
- Business investments
- Major life events
In Texas, this type of loan is known as a Section 50(a)(6) loan, or simply a Texas A6 loan.
Texas-Specific Rules for Cash-Out Refinancing
Texas law imposes stricter guidelines than most states to protect homeowners from over-leveraging their property. Here are the key rules:
1. 80% Loan-to-Value (LTV) Cap
- You can borrow up to 80% of your home’s appraised value.
- This means you must retain at least 20% equity after refinancing.
- Example: If your home is worth $400,000, the maximum loan amount is $320,000.
2. 2% Cap on Lender Fees
- Lender-charged fees (origination, underwriting, etc.) cannot exceed 2% of the loan amount.
- Third-party fees (appraisal, title insurance, attorney fees) are not included in this cap.
3. One Cash-Out Refinance Per Year
- You must wait 12 months between cash-out refinance transactions.
- Even if you refinance without taking additional cash, it’s still considered a cash-out under Texas law.
4. 12-Day Disclosure Period
- After applying, you must receive and sign a 12-day disclosure letter before closing.
- This waiting period ensures you understand the terms and risks.
5. Primary Residence Only
- Texas cash-out refinance rules apply only to your primary residence.
- Investment properties and second homes are not subject to these restrictions.
6. No Additional Equity Loans Allowed
- If you have a Texas cash-out loan, you cannot take out a second lien (like a HELOC or home equity loan) until the cash-out loan is paid off.
7. Waiting Periods After Credit Events
| Event | Waiting Period |
|---|---|
| Foreclosure | 7 years |
| Bankruptcy | 4 years |
| Short Sale | 4 years |
✅ Eligibility Requirements
To qualify for a Texas cash-out refinance, you’ll need to meet both state laws and lender guidelines.
🔢 Minimum Credit Score
- Most lenders require a credit score of 620–660.
- Higher scores may unlock better rates and terms.
📉 Debt-to-Income Ratio (DTI)
- Your DTI should be 43% or less.
- Some lenders may allow up to 50% with compensating factors.
🏦 Home Equity
- You must have at least 20% equity in your home.
- All existing liens (including HELOCs) must be paid off during the refinance.
📍 Occupancy
- The property must be your primary residence.
- You must have owned the home for at least 6 months.
Example 1: Renovating a Family Home
Homeowner: Lisa, Dallas, TX
Home Value: $500,000
Mortgage Balance: $300,000
Equity: $200,000
Credit Score: 720
DTI: 38%
Lisa wanted to renovate her kitchen and bathrooms. She applied for a cash-out refinance and was approved for a new loan of $400,000 (80% of home value). After paying off her existing mortgage, she received $100,000 in cash. Her lender charged 1.5% in fees, well within the 2% cap.
Example 2: Consolidating Debt
Homeowner: Marcus, Austin, TX
Home Value: $350,000
Mortgage Balance: $250,000
Credit Score: 640
DTI: 42%
Marcus had $30,000 in credit card debt and wanted to consolidate it. He refinanced his mortgage to $280,000, receiving $30,000 in cash. His new monthly payment was slightly higher, but his overall debt payments dropped significantly. He signed the 12-day disclosure and closed within 3 weeks.
How to Apply for a Texas Cash-Out Refinance in 2025
Here’s a step-by-step overview of the process:
- Check Your Credit Score
Use free tools or request a report from credit bureaus. - Estimate Your Home’s Value
Use online tools or consult a local appraiser. - Calculate Your Equity
Subtract your mortgage balance from your home’s value. - Shop for Lenders
Compare rates, fees, and terms from banks, credit unions, and online lenders. - Submit Your Application
Provide income documents, bank statements, and property details. - Sign the 12-Day Disclosure Letter
Review and sign before closing. - Schedule an Appraisal
Your lender will order a professional appraisal. - Close the Loan
Sign final documents and receive your funds.
Pros and Cons of Texas Cash-Out Refinancing
✅ Pros
- Access to large sums of cash
- Potentially lower interest rates than personal loans
- Consolidates debt into one payment
- May be tax-deductible if used for home improvements
❌ Cons
- Higher loan balance and monthly payments
- Risk of foreclosure if payments are missed
- Strict Texas rules limit flexibility
- Can reset the mortgage term
What are the cash out refinance rules in Texas?
Texas has unique rules for cash-out refinancing, often referred to as Section 50(a)(6) loans. Homeowners can borrow up to 80% of their home’s value when combined with their existing mortgage. Only one cash-out refinance is allowed within a 12-month period, and closing must take place at a licensed office like a title company. Proceeds must be disbursed directly to the borrower, and strict consumer protections apply. These rules make Texas more restrictive compared to other states.
Can I get Texas cash out refinance investment property?
No, Texas law does not allow cash-out refinancing on investment properties or second homes under Section 50(a)(6). Cash-out loans are restricted to homestead (primary residence) properties only. Investors looking to tap equity from rental or secondary homes must explore alternative financing options, such as home equity lines of credit (outside Texas), portfolio loans, or non-QM cash-out products available through private lenders. The state’s regulations are designed to protect homeowners, not facilitate investment property equity access.
Can you do an FHA cash out refinance in Texas?
Yes, FHA cash-out refinances are available in Texas, but they must still comply with the state’s Section 50(a)(6) rules. This means homeowners can borrow up to 80% loan-to-value, even though FHA guidelines normally allow up to 85%. Borrowers must have lived in the property as their primary residence for at least 12 months, meet FHA credit and debt-to-income standards, and provide full documentation. The Texas rules override federal allowances, making them slightly stricter for homeowners.
Can I do a VA cash out refinance in Texas?
Yes, veterans can do a VA cash-out refinance in Texas, but like FHA, it’s subject to Section 50(a)(6) restrictions. The maximum loan-to-value is capped at 80%, even though the VA typically allows 100% in other states. The property must be the borrower’s primary residence, and standard VA eligibility, credit, and income requirements apply. Closing must also occur at a designated office. While VA offers strong benefits, Texas homeowners face tighter limits compared to national VA guidelines.
How does a HELOC work in Texas?
In Texas, a home equity line of credit (HELOC) allows homeowners to borrow against up to 80% of their home’s value, minus any existing mortgage balance. HELOCs function as revolving credit lines, letting you withdraw funds as needed during the draw period, usually 5–10 years, followed by a repayment period. Texas law requires all closings to occur at a title company, attorney’s office, or lender’s office. Borrowers are also limited to one home equity loan at a time under state rules.
Can you get a home equity loan in Texas?
Yes, Texas homeowners can get a home equity loan, but state laws impose unique restrictions. Known as a Section 50(a)(6) loan, it allows borrowing up to 80% of the home’s fair market value, including the existing mortgage. Only one home equity loan is allowed at a time, and borrowers must wait at least 12 months before refinancing another cash-out loan. The loan must close at a designated office, and strict consumer protection rules govern fees, disclosures, and repayment.
Final Thoughts on Getting a Texas Cash Out Refinance Loan
Texas cash-out refinancing in 2025 remains a powerful tool for homeowners—but it’s not a one-size-fits-all solution. The 80% LTV cap, 12-day disclosure, and annual limit are designed to protect borrowers, but they also require careful planning.
If you’re considering a cash-out refinance, make sure you understand the rules, compare lenders, and evaluate whether it aligns with your financial goals. With the right strategy, you can turn your home equity into a smart financial opportunity.
Want help calculating your borrowing power or comparing lenders? I’d be happy to walk you through it.