Texas Section 50(a)(6): Home Equity Rules in 2026

Texas is the only state in the country that writes home equity rules into its constitution. Article XVI, Section 50(a)(6) caps every Texas home equity loan and cash-out refinance at 80% combined loan-to-value, limits lender fees to 2% of the loan amount, forces a 12-day cooling-off period before closing, and allows only one such loan per homestead per year. National lenders that breeze through cash-out refis in 39 other states often back away from Texas entirely.

For Texas homeowners, that is a feature, not a bug. The rules block the equity-stripping cycles that wrecked household balance sheets in 2008. They also mean you need a lender who runs the Section 50 playbook by reflex. Miss a step and the lien is voidable, which is why some of the biggest names in mortgage lending simply skip the state.

Here is what every Texas home equity rule actually says, where the citations come from, how the math works on a real property, and how to compare a Texas cash-out against a HELOC and a fixed home equity loan without losing money to fees.

The seven Section 50(a)(6) rules that govern every Texas home equity loan

Every rule below comes from Texas Constitution Article XVI Section 50(a)(6) and the implementing regulations in 7 Texas Administrative Code Chapter 153, which the Texas Finance Commission and Credit Union Commission adopted to translate the constitution into operating procedure for lenders. Together they form the spec sheet every TX home equity originator must follow.

Rule 1. 80% combined loan-to-value cap (Section 50(a)(6)(B))

7 TAC § 153.3 states that an equity loan, added to all other liens of record against the homestead, cannot exceed 80% of the fair market value of the home on the date the loan is made. Fair market value is locked at closing, so a later appraisal bump does not unlock more equity on the existing loan.

That is stricter than the rest of the country. Conventional cash-out refis in non-Texas states routinely go to 85% LTV; VA cash-outs can hit 100% in many states. Both are off the table for Texas homestead property.

Rule 2. 2% fee cap, with specific exclusions (Section 50(a)(6)(E))

7 TAC § 153.5 caps total fees on a Texas home equity loan at 2% of the loan amount. The cap applies to almost every fee a lender or broker controls, including origination, underwriting, processing, document prep, and broker compensation.

A handful of charges sit outside the 2% cap:

• Bona fide discount points that genuinely buy down the interest rate
• Third-party appraisal fees paid to a licensed appraiser
• State-licensed surveyor fees
• Title insurance basic premium and endorsements
• Title examination reports priced below the base premium
• Per diem interest
• Escrow funds and homeowner’s insurance premiums

On a $300,000 Texas cash-out, the maximum lender-controlled fee bill is $6,000. That cap is the single most important consumer protection in the statute, and it is why national lenders that depend on $4,000 to $6,000 origination fees often refuse Texas equity business.

Rule 3. 12-day cooling-off period (Section 50(a)(6)(M)(i))

7 TAC § 153.12 prohibits closing a Texas equity loan before the 12th calendar day after the later of two events: the day the borrower submits the application, or the day the lender delivers the required consumer disclosure. Whichever happens last starts the clock.

That blocks the rush-to-close pattern that drives most predatory lending. It also means a 7-day or 10-day digital cash-out timeline that works in Colorado simply cannot exist in Texas. The fastest a compliant Texas equity loan can close is 12 days from the later of application or disclosure delivery, period.

Rule 4. One equity loan per 12 months (Section 50(a)(6)(M)(iii))

7 TAC § 153.14 bars closing a new equity loan before the first anniversary of any prior equity loan secured by the same homestead. The narrow exception is a borrower-initiated request tied to a presidential or gubernatorial state-of-emergency declaration covering the property’s location.

Loan modifications that do not satisfy and replace the original note are allowed inside the year, but they cannot advance new funds and cannot include any term that was prohibited at original closing.

The practical result: rapid serial cash-outs are not legal in Texas. If you tapped equity in February 2026, you cannot tap it again until February 2027.

Rule 5. Closing only at lender, attorney, or title company office (Section 50(a)(6)(N))

7 TAC § 153.15 restricts the closing location to a permanent physical office of the lender, an attorney at law, or a title company. The borrower’s home is explicitly off the table.

That seems mundane until you realize how many national digital lenders use mobile notaries who close in the borrower’s living room. That model works in 49 states. It is not legal for a Texas Section 50(a)(6) home equity loan or cash-out refinance.

Rule 6. No prepayment penalty, ever (Section 50(a)(6)(G))

7 TAC § 153.7 states that a Texas equity loan must be prepayable in full or in part with no penalty and no other charge. Lockout provisions, which would temporarily forbid prepayment, count as prepayment penalties and are also banned.

If a rate eventually drops 100 basis points and you want to refinance, nothing in your existing Texas equity loan can stop you. Compare that to most commercial loans, which still carry 1% to 5% prepayment penalties for the first three to five years.

Rule 7. Once a Section 50(a)(6) loan, always treated like one (Section 50(f))

The “once an A6, always an A6” doctrine sits in Section 50(f) and is interpreted in 7 TAC § 153.45. Once a homestead secures a Section 50(a)(6) home equity loan, any later refinance of that debt must either be itself a Section 50(a)(6) or 50(a)(7) extension, or satisfy every condition in Section 50(f)(2):

• The refinance closes at least one year after the original equity loan
• No additional advance beyond what is needed to pay off the equity loan and refinance closing costs
• Total debt does not exceed 80% of fair market value at refinance
• The lender provides the specific Section 50(f)(2) disclosure to the borrower

The doctrine matters because it locks the homestead into the Texas equity rule set for life. You cannot pay off a Section 50(a)(6) loan with a conventional rate-and-term refi to escape the 80% LTV cap on future borrowing against that home unless you meet every (f)(2) condition.

Texas cash-out, HELOC, and fixed home equity loan: how the three compare

Every one of these is a Section 50(a)(6) extension of credit. Same constitutional cap, same 12-day wait, same 2% fee ceiling. The differences are in structure.

Product	Rate type	Disbursement	Texas-specific cap	Best for
Cash-out refinance	Fixed, first lien	Lump sum at closing	80% CLTV, 2% fees, 12-day	Rate-and-term improvement + cash
Home equity loan	Fixed, second lien	Lump sum at closing	80% CLTV, 2% fees, 12-day	Lump-sum need, keep low first-mortgage rate
HELOC	Variable, second lien	Revolving draw, 5 to 10 years	80% CLTV, 2% fees, 12-day	Ongoing or uncertain spending
National avg rate (May 2026)	8.03% to 8.15% home equity loan; around 7.00% HELOC

The choice between cash-out refi and a second-lien product comes down to first-mortgage rate. If you closed your first mortgage at 3.5% in 2021, blowing it up to refinance into a 7.5% first lien for $50,000 of cash rarely pencils out. A fixed home equity loan or a HELOC sitting on top of the existing 3.5% mortgage almost always wins. Run the break-even math against your specific rate before signing anything.

Compare current Texas home equity options with no credit pull and no contact info required at Chestnut’s rate comparison tool. Texas borrowers see real rates from real lenders, with the 2% Section 50 fee cap already enforced.

How the 80% LTV math works on a Texas home

Take a Texas homestead appraised at $500,000 with $250,000 owed on the first mortgage. Section 50(a)(6)(B) and 7 TAC § 153.3 set the maximum combined debt at 80% of $500,000, or $400,000. Subtract the existing $250,000 and the maximum new equity borrowing is $150,000.

Appraised value	Existing first lien	Max combined debt at 80%	Max equity loan available
$300,000	$150,000	$240,000	$90,000
$500,000	$250,000	$400,000	$150,000
$750,000	$400,000	$600,000	$200,000
$1,000,000	$500,000	$800,000	$300,000

Two real-world wrinkles to budget for:

1. The 2% fee cap eats into proceeds. On a $150,000 equity loan, lender fees can be up to $3,000. That comes out of your wire at closing, so plan around it.
2. Title insurance and appraisal are outside the cap but still cost real money. Expect $500 to $800 for the appraisal and a TDI-promulgated basic premium for title that scales with loan amount. Our Texas closing costs guide walks the line items.

If you bought your home within the last eight years, the TDI Rate Rule R-8 refi discount can cut your title premium by 25% or 50%, depending on how long you have owned the home. That savings sits outside the 2% cap and routinely returns $500 to $2,000 to a Texas equity borrower.

What Section 50 means in practice, by borrower scenario

The Austin homeowner with a 3% first mortgage and $80,000 in renovation needs

This borrower should not touch a cash-out refi. Replacing a 3% first lien with a 7.5% one to extract $80,000 typically adds well over $80,000 in lifetime interest cost. A Texas fixed home equity loan or HELOC keeps the cheap first lien intact, and the Section 50(a)(6) 80% CLTV cap still allows up to $80,000 if the home and first balance support it.

The Dallas borrower with a 6.5% first mortgage who wants to consolidate $40,000 of credit card debt

This is the cash-out scenario where Texas Section 50 rules work in the borrower’s favor. The 2% fee cap holds total origination cost under $7,000 even on a $350,000 cash-out, which is well below the national average closing cost of $4,661 before the refi discount on title. The 12-day cooling-off enforces a real shopping window. Run a parallel HELOC quote and let APR decide.

The Houston investor with a primary homestead and three rentals

Section 50(a)(6) applies only to homestead property. Cash-out refinances against non-homestead investment properties in Texas follow ordinary investment-property rules: usually 70% to 75% LTV with no 2% fee cap, no 12-day wait, and standard prepayment language. Treat the homestead as the constrained asset and the rentals as the flexible ones.

Texas equity is most powerful when you let the constraints push you to the right product. Talk to a Chestnut Texas equity specialist before locking anything in, and bring the rule list above to every lender conversation.

What is different in Texas versus Colorado

Colorado has no constitutional equivalent to Section 50(a)(6). Colorado cash-out refinances and home equity products follow ordinary state and federal lending rules: typical 80% to 85% LTV on conforming products, no 2% fee cap, no 12-day waiting period beyond the standard TRID three-business-day Closing Disclosure window, and no once-per-year limit.

That makes Colorado equity faster, more flexible, and frequently more expensive on a fee basis. A Colorado HELOC can close in seven to ten days; a Texas HELOC cannot close before day 12 by constitutional command. For Chestnut borrowers shopping across both states, the Colorado HELOC rates and requirements guide walks the full Colorado rule set, and the Colorado cash-out refi rules play out very differently from Texas.

More Texas mortgage guides

• Texas Closing Costs in 2026: Fees, Title Rates & Savings
• Texas Cash-Out Refinance up to 80% LTV: Digital Checklist
• Home Equity Loan vs. Cash-Out Refinance in Texas: Tax Deduction Math
• HELOC vs. Home Equity Loan: Which Is Right for You
• Texas Refinance Break-Even on a 4% Mortgage

Frequently Asked Questions

What is Texas Section 50(a)(6)?

Section 50(a)(6) of Article XVI of the Texas Constitution sets the rules for every home equity loan and cash-out refinance secured by a Texas homestead. It caps combined liens at 80% of fair market value, limits lender fees to 2% of the loan amount, requires a 12-day cooling-off period before closing, allows only one equity loan per homestead per 12 months, bans prepayment penalties, and requires closing at a lender office, attorney office, or title company office.

What is the Texas 80% LTV cap on home equity loans?

7 TAC § 153.3 implements Section 50(a)(6)(B) and requires that the new equity loan plus all other recorded liens against the homestead total no more than 80% of the fair market value on the closing date. On a $500,000 home with a $250,000 first lien, the maximum new equity borrowing is $150,000.

How does the Texas 12-day cooling-off period work?

The 12-day clock starts on whichever happens later: the day you submit the application, or the day the lender delivers the required consumer disclosure. Closing can occur on or after the 12th calendar day after that later event. The rule is enforced by 7 TAC § 153.12 and lives in Section 50(a)(6)(M)(i) of the constitution.

What does “once an A6, always an A6” mean?

It means that once a Texas homestead secures a Section 50(a)(6) home equity loan, any later refinance of that debt is also locked into the Section 50 framework unless every condition in Section 50(f)(2) is satisfied. Those conditions include a one-year wait, no new advance beyond payoff plus refinance closing costs, an 80% LTV ceiling at refinance, and a specific Section 50(f)(2) disclosure.

What is the Texas 2% fee cap on cash-out refinances?

Section 50(a)(6)(E), implemented by 7 TAC § 153.5, caps total fees on a Texas home equity loan or cash-out refinance at 2% of the loan amount. Bona fide discount points, third-party appraisal fees, surveyor fees, title insurance basic premiums, per diem interest, escrow funds, and homeowner’s insurance premiums all sit outside the cap.

Can I have more than one Texas home equity loan at a time?

No. Section 50(a)(6)(M)(iii) and 7 TAC § 153.14 bar closing a new equity loan before the first anniversary of any prior equity loan on the same homestead. The narrow exception is a borrower-requested closing tied to a presidential or gubernatorial state-of-emergency declaration covering the property.

Where can a Texas home equity loan close?

Only at a lender office, an attorney at law’s office, or a title company office, per Section 50(a)(6)(N) and 7 TAC § 153.15. Mobile-notary closings at the borrower’s home are not permitted. That blocks the in-home digital closing model that some national lenders use in other states.

Does the Texas Section 50 framework apply to investment properties?

No. Section 50(a)(6) applies only to homestead property. Cash-out refinances against non-homestead Texas investment properties follow ordinary investment-property guidelines, usually 70% to 75% LTV with no fee cap, no 12-day wait, and standard prepayment language.

Sources

1. Texas Constitution, Article XVI, Section 50
2. Cornell Legal Information Institute, 7 Tex. Admin. Code Chapter 153 - Home Equity Lending
3. Cornell Legal Information Institute, 7 TAC § 153.3 - 80% LTV Cap
4. Cornell Legal Information Institute, 7 TAC § 153.5 - 2% Fee Cap
5. Cornell Legal Information Institute, 7 TAC § 153.7 - No Prepayment Penalty
6. Cornell Legal Information Institute, 7 TAC § 153.12 - 12-Day Cooling-Off Period
7. Cornell Legal Information Institute, 7 TAC § 153.14 - One Equity Loan per 12 Months
8. Cornell Legal Information Institute, 7 TAC § 153.15 - Location of Closing
9. Cornell Legal Information Institute, 7 TAC § 153.45 - Refinance of an Equity Loan
10. Texas Department of Insurance, Title Insurance Basic Manual Section III - Rate Rule R-8
11. Bankrate, Average Closing Costs By State, 2025
12. Bankrate, Home Equity Loan Rates
13. Bankrate, HELOC Rates