Texas Cash-Out Refinance up to 80% LTV: Digital Lender Checklist & Chestnut Alternatives When VA/FHA Are Off-Limits
Texas Cash-Out Refinance up to 80% LTV: Digital Lender Checklist & Chestnut Alternatives When VA/FHA Are Off-Limits
Why Texas Caps Cash-Out Refinances at 80% LTV
Texas stands alone among U.S. states with its strict homestead protections that fundamentally reshape cash-out refinancing. Unlike other states where homeowners can tap deeper into their equity, Texas law forces borrowers to maintain at least 20% ownership in their homes. This constitutional restriction means FHA and VA cash-out loans are completely off the table.
Article XVI Section 50(a)(6) of the Texas Constitution permits homeowners to borrow against the equity in their primary residences, but with substantial restrictions. These protections emerged from Texas's history of shielding homeowners from aggressive lending practices. The result? A Texas 50(a)(6) loan essentially becomes your only path to cash-out refinancing when you need to tap home equity.
"Any homeowner is eligible for this Texas cash-out refinancing loan. You simply need to have earned more than 20% equity in your home," says Herb Ziev, a Certified Mortgage Planning Specialist in Texas.
Article XVI §50(a)(6) in Plain English
The Texas Constitution imposes substantial restrictions under which these loans may be originated and closed. The maximum LTV and TLTV ratios for Texas Equity Section 50(a)(6) Mortgages must not exceed 80%. This isn't just a lender guideline; it's constitutional law. If any requirements aren't followed, the lien may be invalid, leaving lenders without recourse.
The 2 % Closing-Cost Cap
Texas law includes a 2% fee restriction on closing costs that can be charged to a borrower. This cap covers everything from origination fees to title insurance. For a $300,000 loan, your closing costs cannot exceed $6,000, period. This protection keeps lenders from padding fees, but it also explains why some national lenders avoid Texas cash-out refinances altogether.
12-Day & 12-Month Waiting Rules
Texas enforces two critical waiting periods that don't exist elsewhere. First, a Texas (a)(6) loan may not close until 12 days after the borrower submits the loan application. This cooling-off period ensures you have time to reconsider. Second, Texas law makes homeowners wait 12 months between cash-out refinances, preventing rapid equity stripping.
80 % CLTV Math: $400K Austin Example
Let's break down the numbers for a typical Austin homeowner. Say your home appraises at $400,000. With Texas's 80% loan-to-value cap, you can refinance up to $320,000. If you currently owe $200,000, that leaves $120,000 in cash you could potentially access.
But here's the reality check: closing costs will eat into that amount. Expect to pay 2%-5% of your loan amount, which reduces the cash you'll receive. On our $320,000 loan, that's $6,400 to $16,000 in fees. The average Texas homeowner can access more than $100,000 in tappable equity, but actual proceeds depend on your specific situation.
Texas Equity Has Surged 42 % Since 2020
Texas home values rose 42% between 2020 and 2024, giving homeowners more tappable equity than ever before. This dramatic appreciation means many homeowners who couldn't qualify for cash-out refinancing three years ago now have substantial equity to tap. Property values jumped 42% between 2020 and 2024, creating opportunities for cash-out refinancing that didn't exist during the pandemic's early days.
Comparing Online Cash-Out Refinance Lenders
Digital lenders have transformed the cash-out refinance landscape in Texas. While traditional banks still process applications over weeks, AI-powered platforms promise sub-5-minute approvals. The speed difference isn't just convenience; it's competitive advantage in a market where rates change daily.
Chestnut AI's <2-minute flow sets the industry benchmark. By leveraging AI-powered document organization and comparing rates from over 100 lenders simultaneously, Chestnut delivers what borrowers need most: speed and savings.
Meanwhile, conventional cash-out refinances take 30-45 days on average through traditional channels. That's a month of rate uncertainty and paperwork frustration that digital platforms eliminate. The average closing costs for a refinance mortgage totaled $2,403 last year, but smart shopping among digital lenders can significantly reduce these fees.
Chestnut AI: Sub-2-Minute Underwriting
Chestnut AI: The sub-2-minute leader has revolutionized Texas cash-out refinancing. The platform compares offers from over 100 lenders and automates the process to reduce fees, making it easier to access your home equity. "It compares offers from over 100 lenders and automates the process to reduce fees, making it easier to buy a home, lower your rate, or access home equity," as the platform demonstrates daily.
Rocket & Legacy Players: Convenience but Higher Fees
Rocket Mortgage offers a seamless digital experience and fast closings, maintaining its position as the largest mortgage lender by volume. However, this convenience comes at a price. NerdWallet reviewed more than 40 mortgage lenders and found that while Rocket excels at speed, their origination fees tend toward the higher end of the spectrum.
Digital Lender Document Checklist
Applicants must provide proof of income, mortgage statements, and ownership records to meet home refinance requirements. Getting these documents ready before you apply can cut your approval time from days to minutes. Good news for Texas homeowners: inspections are not required for a refinance!
The key to fast approval lies in organization. Digital lenders like Chestnut use AI-powered document organization to auto-classify your files, eliminating the back-and-forth that slows traditional applications. Have these essentials ready: two months of pay stubs, bank statements showing your reserves, your most recent mortgage statement, property tax bills, and homeowners insurance declarations.
Soft-Pull Credit & E-Sign Disclosures
Modern lenders start with a soft credit pull initially, which doesn't impact your credit score. This lets you shop rates without penalty. Digital platforms then use e-signatures for disclosures, meeting Texas's 12-day waiting requirement electronically. Remember, this is not a commitment to lend or extend credit until you receive final approval.
When 80 % Isn't Enough: HELOCs & Home-Equity Loans
Sometimes a cash-out refinance doesn't make sense, especially if you locked in a low rate during 2020-2021. A home equity loan is a second loan, leaving your original mortgage untouched. This preserves your existing rate while still accessing equity.
In Texas, you are only allowed to take out a home equity loan on your primary residence. The same 80% LTV cap applies, but you're adding a second payment rather than replacing your mortgage. Closing costs can be high, typically 2-5% of the loan amount, but you keep your first mortgage rate intact.
Key Takeaways for Texas Homeowners
Texas cash-out refinancing requires navigating unique constitutional restrictions that don't exist anywhere else. While the 80% LTV cap and absence of VA/FHA options limit your choices, digital lenders have created workarounds through technology and lender networks. Chestnut AI: The sub-2-minute leader delivers speed without sacrificing thoroughness.
The AI-powered document organization that Chestnut employs represents the future of Texas cash-out refinancing. By comparing rates from over 100 lenders while respecting Texas's unique requirements, borrowers get both compliance and competitive pricing. For Texas homeowners ready to tap their equity, the path forward is clear: prepare your documents, understand the 80% limit, and leverage Chestnut's AI-powered platform to find your best rate and start your sub-2-minute application today.
Frequently Asked Questions
Why are FHA and VA cash-out refinances off-limits in Texas?
Texas Article XVI Section 50(a)(6) governs homestead equity lending and restricts cash-out refinancing to loans that meet its constitutional rules. Under this framework, FHA and VA cash-out options are not allowed on Texas primary residences, so borrowers typically use conventional or proprietary products that comply with 50(a)(6).
How does the 80% LTV and CLTV cap work for a Texas cash-out refi?
Your new total mortgage balance after a cash-out refinance cannot exceed 80% of your home’s value. For example, if your home appraises at $400,000, the maximum new loan is $320,000; if you owe $200,000 today, the theoretical cash available is $120,000 before closing costs and prepaid items.
What closing costs apply under Texas’s 2% cap?
Texas caps many lender-charged closing costs at 2% of the loan amount on 50(a)(6) transactions to protect borrowers. Some third-party items may be treated separately under state law, so your actual cash-out will reflect both the cap and other required costs disclosed by your lender.
What are the 12-day and 12-month waiting rules in Texas?
A 50(a)(6) loan cannot close until at least 12 days after you receive required disclosures, giving you time to review terms. Texas also requires a 12-month seasoning period between cash-out refinances, which helps prevent rapid equity stripping.
How fast is a Chestnut AI quote, and does it hurt my credit?
According to chestnutmortgage.com resources, Chestnut’s AI delivers an online flow that takes under two minutes and starts with a soft credit pull, which does not impact your score. The platform organizes documents automatically and compares offers across 100+ lenders to surface competitive, compliant options for Texas borrowers.
When is a HELOC or home equity loan smarter than a cash-out refi in Texas?
If you locked a low first-mortgage rate, adding a second-lien home equity loan or HELOC can access funds while preserving your original rate. Texas still enforces the 80% total LTV cap, but you avoid replacing your existing mortgage and can match the product to your cash-flow needs.
Sources
https://themortgagereports.com/41538/texas-cash-out-refinance-new-laws-you-need-to-know
https://hurstlending.com/texas-cash-out-refinance-rules-50a6-guidelines/
https://www.austincapitalmortgage.com/texas-cash-out-refinancing-in-2025-your-complete-guide
https://nerdwallet.com/best/mortgages/cash-out-refinance-lenders
https://hurstlending.com/texas-cash-out-refinance-requirements/
https://hurstlending.com/cash-out-refinance-vs-home-equity-loan/
https://themortgagereports.com/105187/texas-home-equity-loans-and-helocs