Texas Home Equity Rules: The 80% Limit Explained
The short version
The Texas Constitution sets the rules for borrowing against your primary residence (called your homestead). They apply to home equity loans, home equity lines of credit (HELOCs), and most cash-out refinances.
The rule most people run into: all the loans on your home combined can’t exceed 80% of its value. On a $400,000 home, that’s $320,000 in total mortgage debt, including the new loan.
The rules also limit fees, set a waiting period before closing, and add protections if you can’t repay.
Why Texas is different
The Texas Constitution, in Article XVI, Section 50, lists the only kinds of debt that can be secured by a homestead. Borrowing against your equity is one of them, but only if the loan follows a specific set of conditions. Lenders and borrowers often call these “50(a)(6) loans,” after the section of the constitution that governs them. HELOCs are covered by a related set of rules in the same section.
These rules apply to your homestead, the home you live in as your primary residence. Investment properties and second homes follow different rules.
The main rules
1. The 80% limit. The new loan plus all other debt secured by your home can’t exceed 80% of your home’s fair market value on the day the loan is made. For a HELOC, the limit applies on the day the line of credit is set up, and you can’t draw more while the balance is above 80% of that value. If you owe $250,000 on a $400,000 home, the most you could borrow against your equity is $70,000 ($320,000 minus $250,000).
2. A cash-out refinance usually counts. In Texas, if you refinance your mortgage and take out extra money, the new loan generally must follow the home equity rules, including the 80% limit. The exceptions are extra money used only for the costs of the refinance, or for a few purposes the constitution lists separately, such as paying property taxes or home renovation.
3. One at a time, and once a year. A home equity loan must be the only debt on your home when it’s made, other than a few kinds the constitution allows, such as your purchase mortgage. So if you already did a cash-out refinance under these rules, you generally can’t add a separate home equity loan or HELOC until that loan is paid off or refinanced into a regular mortgage. You also generally can’t close a new home equity loan within one year of closing the last one.
4. A waiting period before closing. The loan can’t close before the 12th day after you apply or receive the required notice explaining your rights, whichever is later. It also can’t close until at least one business day after you receive a final itemized list of the fees and charges, unless you agree in writing because of an emergency or other good cause.
5. A cap on fees. Fees to make, record, insure, or service the loan can’t exceed 2% of the loan amount. Interest and discount points you pay to lower your rate don’t count toward the cap, and neither do fees for:
- an appraisal by a third-party appraiser
- a property survey by a state registered or licensed surveyor
- the state base premium for the lender’s title insurance policy, with endorsements
- a title examination report, if it costs less than the state base premium for the lender’s title insurance policy without endorsements
6. A right to cancel. You (and your spouse) can cancel within three days after the loan is made, without penalty or charge.
Protections if you can’t repay
Two protections stand out, especially for homeowners going through a hard time:
- You’re not personally liable beyond the home. A Texas home equity loan must be “without recourse for personal liability” against you and your spouse, unless you got the loan by actual fraud. If you default, the lender can look only to the home, not your other assets or wages.
- Foreclosure requires a court order. A lender can foreclose on a home equity loan only with a court order, so you have a chance to respond in court.
These protections apply to home equity loans made under the constitution’s rules. A regular purchase mortgage works differently, so check your loan documents to see which kind you have.
Getting out of the rules later
If your home equity loan’s restrictions become a problem (for example, you want to add a HELOC), you may be able to refinance it into a regular mortgage. All of these must be true:
- at least one year has passed since the home equity loan closed
- the new loan doesn’t include new cash, other than money to pay off debts the constitution allows on a homestead and the actual costs and reserves the lender requires for the refinance
- the new loan plus all other debt on your home is no more than 80% of its value
- the lender gives you a required written notice within three business days after you apply, and at least 12 days before closing
After that, the new loan is treated as a regular refinance. Know the trade-off: as that notice explains, the new loan can be with recourse for personal liability, so you give up the protections above.
What this means for your plans
If you’re thinking about a HELOC or home equity loan: check your combined loan-to-value first. The home equity calculator shows it as “CLTV.” In Texas, it must stay at or below 80% after the new loan.
If you’re comparing a HELOC with a cash-out refinance: in Texas, both generally fall under the same 80% limit, so the decision mostly comes down to rates and costs. If your current mortgage rate is low, a cash-out refinance moves your whole balance to today’s rate. Compare the total cost with the HELOC vs. cash-out refinance calculator.
If you need money for a big expense: consider whether you’ll want to borrow against your home again within a year. The one-loan-at-a-time rule and the one-year wait between home equity loans can limit your options later.
Lowering your Texas property taxes
Property taxes flow into your monthly payment if you have an escrow account. Two things to check:
- Homestead exemptions. Texas exempts part of your home’s value from school district property taxes if it’s your primary residence. Voters raised that exemption from $100,000 to $140,000 in November 2025, effective for the 2025 tax year, and raised the additional school district exemption for homeowners 65 or older or with disabilities to $60,000. Make sure your exemption is filed with your county appraisal district.
- Protesting your appraisal. If your home’s appraised value looks too high, you can protest it with your appraisal district. The deadline is usually May 15 or 30 days after your appraisal notice is delivered, whichever is later.
For more ways to lower your payment, see how to lower your mortgage payment without refinancing.
Frequently asked questions
Can I get a HELOC in Texas if I owe more than 80% of my home’s value?
No. In Texas, the HELOC limit plus all other debt secured by your homestead can’t exceed 80% of the home’s value on the day the line is set up. You’d need to pay down your mortgage or wait for your home’s value to rise.
Is a cash-out refinance in Texas the same as a home equity loan?
Usually. Under the Texas Constitution, if you take out extra cash beyond the costs of the refinance and a few specific uses (such as property taxes or renovation), the new loan must follow the same home equity rules, including the 80% limit and the one-loan-at-a-time rule.
How long does it take to close a Texas home equity loan?
At least 12 days from when you apply or receive the required notice, whichever is later. The actual time depends on your lender, the appraisal, and paperwork.
Can a lender take my other assets if I default on a Texas home equity loan?
No, unless you got the loan by actual fraud. Texas home equity loans must be without recourse for personal liability, so the lender can look only to the home. Foreclosure also requires a court order.
Sources: Texas Constitution Article XVI, Section 50; Texas Tax Code Section 41.44; Texas Comptroller, property tax exemptions; S.J.R. 2, 89th Legislature. Checked October 2026.
Information here is general guidance, not legal or financial advice. Texas home equity rules are set by the Texas Constitution and can change through constitutional amendments approved by voters. Talk to a Texas real estate attorney or your lender about your specific situation.