Home Equity Loans in Texas: Your Complete Guide to Accessing Your Home’s Value

If you’re a Texas homeowner looking to tap into your home’s value, you’ve come to the right place. At Texaslending.com, we have been helping Texans with home equity loans for more than 25 years. Whether you’re in Dallas, Fort Worth, Houston, Austin, or anywhere across the Lone Star State, understanding how home equity loans in Texas work is the first step toward making a smart financial decision.

With American households holding over $34 trillion in home equity nationwide, Texas homeowners have significant opportunities to leverage their property’s value. This guide covers everything you need to know, from Texas-specific regulations to the application process with Texaslending.

What Is a Home Equity Loan?

A home equity loan allows you to borrow against the equity you’ve built in your home. Your equity represents the difference between your home’s current market value and the amount you still owe on your mortgage. As you make mortgage payments and your property appreciates, your equity grows.

In Texas, homeowners have options for accessing cash from their home equity. One option is a “Texas Cash Out Refinance” loan, which is a mortgage refinance option that converts a portion of your equity into cash. Borrowers may also do a 1st lien home equity loan or a 2nd lien fixed rate home equity loan in Texas. Unlike a home equity line of credit that works like a credit card, a 1st lien or 2nd lien home equity loan provides a lump sum with fixed monthly payments. Cash Out Refinances, as well as 1st lien and 2nd lien home equity loans may be done on primary residences, second homes and on investment properties with Texaslending.com. This structure makes budgeting straightforward since your payment remains consistent throughout the loan term.

Understanding Texas Home Equity Regulations

Texas home equity lending programs operate under some of the strictest regulations in the country. The Texas Constitution includes specific provisions designed to protect homeowners from over-leveraging their most valuable asset. Understanding these rules will help you navigate the process with confidence.

The 80% Loan-to-Value Cap

Texas law limits borrowing to 80% of your home’s appraised market value, meaning you must retain at least 20% equity. For example, if your home is valued at $400,000 and you owe $200,000, you could potentially access up to $120,000 in equity ($400,000 × 80% = $320,000, minus your $200,000 balance). The amount available to borrow will also depend on your debt to income ratio, your credit score, and the type of property being financed.

Primary Residence Requirement

Home equity loans in Texas are not only available on your primary residence but also on second homes and Investment properties.

One Home Equity Loan at a Time

Texas permits only one home equity loan on your property at any given time. If you have an existing home equity loan, you must pay it off before obtaining a new one.

Mandatory Waiting Periods

The Texas home equity process includes built-in consumer protections. A minimum of 12 calendar days must pass between receiving your loan disclosures and closing. Additionally, a three-day rescission period after closing is required before funds can be disbursed. This gives you time to review all terms and cancel without penalty if you change your mind.

Annual Limitation

Texas homeowners can only close on one home equity loan per calendar year on the same property.

Additional Texas Consumer Protections

Beyond the core regulations above, Texas home equity lending includes several additional safeguards that protect borrowers. These rules, established in the Texas Constitution and state regulations, give Texas some of the strongest homeowner protections in the nation:

• 2% Fee Cap: Lender fees cannot exceed 2% of the loan principal. This cap excludes appraisal fees, title insurance, and survey fees, but ensures you won’t face excessive closing costs.

• Closing Location Requirements: Your loan must close at a lender’s office, title company, or attorney’s office—never at your home or any other location. This requirement ensures proper oversight of the closing process.

• No Cross-Default Clauses: Lenders cannot demand payment on your home equity loan because you defaulted on a different debt. Your home equity loan remains separate from other financial obligations.

• No Acceleration Due to Value Decline: If your home’s market value decreases, the lender cannot accelerate the loan or demand early repayment. This protects you during market downturns.

• HELOC Minimum Draw: For home equity lines of credit (HELOCs), each advance must be at least $4,000. You cannot use a credit card, debit card, or pre-printed check to access HELOC funds.

• No Prepayment Penalties: Texas law prohibits prepayment penalties on home equity loans, meaning you can pay off your loan early without additional fees.

• Non-Recourse Protection: Home equity loans in Texas are non-recourse, meaning the lender cannot pursue your other assets if you default—only the home itself serves as collateral.

• Lender Accountability (Forfeiture Penalty): If a lender violates Texas home equity rules and fails to cure the violation within 60 days of being notified, they may forfeit all principal and interest on the loan. This gives Texas regulations serious enforcement power.

These protections are designed to help Texas homeowners make informed decisions and avoid financial hardship from over-leveraging their homes.

Your Home Equity Loan Options in Texas

Your loan options depend on several factors, including how much equity you currently have, your credit score, your debt-to-income ratio, and other financial considerations. At Texaslending, we work with you to identify the solution that best fits your unique situation.

We have made viewing your options easy. Take a look at your potential Texas home equity loan options in a side-by-side comparison on our website.

When accessing your home equity in Texas, you generally have three primary paths. A traditional home equity loan provides a lump sum with fixed payments, ideal for one-time expenses. A home equity line of credit offers flexible access to funds with variable rates. A cash-out refinance replaces your existing mortgage with a new, larger loan and gives you the difference in cash. Homeowners in Houston, Dallas, and throughout Texas often find that comparing these options helps clarify which approach aligns with their financial goals.

How Much Cash Out Can You Qualify For?

Texas mortgage regulations allow you to access up to 80% of your home’s current appraised market value, minus any existing mortgage balance. The amount you ultimately qualify for depends on your property’s value, current loan balance, and overall financial profile.

To get a simple estimate, use our Home Equity Calculator to see how much cash out you could potentially qualify for.

For a comprehensive assessment, speaking directly with a licensed mortgage consultant is the best approach. Our team at Texaslending can evaluate your complete financial picture and provide personalized guidance. Get started on our website to connect with one of our Texas lending experts.

Current Home Equity Loan Rate Environment

Interest rates play a significant role in determining the overall cost of your home equity loan. Texaslending rates are influenced by broader market conditions, including Federal Reserve policy decisions, as well as individual factors like your credit score, loan-to-value ratio, and debt-to-income ratio.

Following Federal Reserve rate adjustments, home equity loan rates have been trending favorably for borrowers. While rates remain higher than pandemic-era lows, many Texas homeowners are finding competitive terms to leverage their equity. Borrowers with higher credit scores, lower debt ratios, and substantial equity typically secure the most favorable rates. Working with experienced home lenders in Texas like Texaslending ensures you receive guidance on positioning yourself for the best possible terms.

Is a Home Equity Loan a Smart Financial Decision?

This question deserves careful consideration based on your specific financial goals. Many Texans choose to utilize their home’s equity because it offers potential savings and greater financial flexibility compared to other borrowing options.

Paying off higher-interest debt represents one of the most financially sound uses of home equity. Credit card balances, personal loans, and other high-rate debt can be consolidated into a single, lower-interest home equity loan, potentially saving thousands in interest charges. Using home equity to finance home renovations is another popular choice, as improvements can increase your property’s value.

For more ideas, read our article on “Smart Ways to Use Your Home Equity.”

While home equity loans offer significant benefits, they are not ideal for every situation. Because your home serves as collateral, borrowing for non-essential expenses carries risk. A thoughtful evaluation of your goals and repayment capacity will help determine whether this option is right for you.

How to Apply for a Home Equity Loan with Texaslending

At Texaslending.com, we have streamlined the application process to make accessing your home’s equity as simple as possible. You can submit an inquiry online or call us directly at 1-800-346-8047 to speak with a licensed mortgage consultant.

Once you reach out, one of our experienced team members will contact you to discuss your goals and walk you through the process step by step. We handle the details so you can focus on what matters most to you. From gathering documentation to coordinating your closing, Texaslending provides guidance at every stage.

Learn more about home equity loans on Texaslending.