I do HELOCs. A home equity line of credit lets you keep the mortgage you have and draw on your equity when you need it. In Texas, a HELOC on your homestead is a home equity loan under the Texas Constitution, and the Constitution writes a lot of the rules. Here's what they say, when a HELOC beats a cash-out refinance, and what to send me. I'm in Fort Worth, and most of my clients are around DFW.
I always start with a soft pull, so no hard credit ding.
Texas protects homesteads in its Constitution. A lien on the home you live in is only valid for the reasons Article XVI, Section 50 lists. Home equity loans are paragraph 50(a)(6). It says a home equity loan can't be an open-end account you draw on from time to time, unless it's a home equity line of credit as defined in subsection 50(t).
So a Texas HELOC has to follow two sets of rules: the ones for every Texas home equity loan, and the extra ones for lines of credit. They apply to every lender. I'm a loan officer, not a lawyer, but here's how they read.
The most you can borrow on the line, plus everything else owed against your homestead, can't be more than 80% of the home's fair market value on the day the line is set up. The state's official interpretation says that maximum is fixed at closing and doesn't change over the life of the line. You and the lender both sign a written acknowledgment of the value.
Every advance has to be at least $4,000. A Texas HELOC is built for real projects, not everyday spending.
You can't draw with a credit card, debit card, or anything like them, or with checks the lender sends you without asking. You can ask the lender for an advance directly, by phone or electronic transfer, or use checks you specifically requested.
Any fees can be charged only when the line is set up. No fee for a draw. Texas home equity loans also have a cap on fees, explained on my cash-out refinance page.
The lender can't change the terms of the line on its own. The Constitution also sets rules for how a Texas HELOC gets paid back. I'll walk you through the structure on yours before you sign.
That's the point of a line. You request advances, pay money back, and borrow it again, within the limit set at closing. The required Texas notice adds that if the balance ever goes over 80% of the value set at closing, no more draws until it's back under.
Because a HELOC on your homestead is a 50(a)(6) loan, the same rules as a Texas cash-out apply:
You like your first mortgage and don't want to touch it. You need money over time, like a remodel paid in stages, and not all at once. You want access to equity without borrowing it all on day one.
You want one loan instead of two. You need the cash up front. Your current loan has a problem a refinance would fix anyway. See the Texas cash-out refinance guide.
Both count as your one Texas home equity loan, and both follow the 80% limit and the closing rules. If you don't need cash at all and just want a better loan, that's a rate-and-term refinance. Later, if you want out of the home equity rules, there's a path back to a regular loan after a year; it's on the rate-and-term page.
Want the rules as a quick Q&A? My library has Texas HELOC rules: what you can and can't do.
Send the short form, call, or email. Tell me what the house is worth, what you owe, and what the money is for. I'll tell you whether a HELOC or a cash-out fits better under the Texas rules. If neither makes sense, I'll say so.
I always start with a soft pull, so no hard credit ding.
Yes. I do HELOCs on Texas homesteads around Fort Worth and DFW. Send me what the house is worth and what you owe, and I'll tell you roughly how big a line could be before anybody orders an appraisal.
The full line, plus everything else owed against your homestead, can't be more than 80% of the home's fair market value on the day the line is set up. That maximum is set at closing and doesn't grow if your home goes up in value later.
Usually, yes, as long as your current first mortgage is a regular purchase or refinance loan. If it's already a Texas home equity loan, like a cash-out refinance, you can't add a HELOC. Only one Texas home equity loan can be on your homestead at a time.
No card. The Texas Constitution doesn't allow draws by credit card, debit card, or similar device. You can ask the lender for an advance directly or by transfer, and you can use checks you specifically asked for. Each draw has to be at least $4,000.
It can't close before the 12th day after the later of the day you apply or the day you get the Texas home equity notice. After that it's the appraisal, title, and your documents. It closes only at the lender's office, a title company, or an attorney's office.
No. These rules are about your homestead. A line or loan against a rental follows lender and program rules instead. Tell me about the property and I'll tell you what fits.
I always start with a soft pull, so no hard credit ding.
General information, not legal advice. The rules come from the Texas Constitution, Article XVI, Section 50, and the state's official interpretations, including 7 TAC 153.84 and 7 TAC 153.86. Subject to qualification and program guidelines. Not all applicants will qualify. Not a commitment to lend.
More answers on the FAQ page, or see Fort Worth home loans. Or head back home.