Texas homestead law is among the strongest in the nation, and Texas home equity lending is governed by constitutional provisions that create requirements not found anywhere else. MLOs originating home equity loans, cash-out refinances, or HELOCs in Texas must understand these rules before taking the application. Violations can result in the loan being uncollectable.
The 80% CLTV Constitutional Limit
Article XVI, Section 50(a)(6) of the Texas Constitution imposes an 80% maximum combined loan-to-value ratio on home equity loans and cash-out refinances against a Texas homestead. This is not a lender overlay or guideline threshold; it is a constitutional restriction. You cannot close a Texas home equity loan at 81% CLTV even if a lender is willing to do it. The limit applies to the combined balance of all liens secured by the homestead.
The 12-Day Cooling Off Period
Texas requires a 12-day waiting period between the date the borrower receives required disclosures and the date the loan can close. If disclosures are delivered on day one, the earliest closing date is day 13. This is not a business day calculation; it is 12 calendar days. You must build this into your timeline for every Texas home equity transaction. An application received late in the month with a desired month-end close may not be achievable if the 12-day period is not accounted for.
One Lien at a Time
A Texas homestead can only have one outstanding Section 50(a)(6) home equity lien at a time. This means a borrower with an existing home equity loan cannot take out a second home equity loan or HELOC simultaneously while the first remains outstanding. They must first pay off the existing home equity lien. Rate and term refinances that pay off an existing Section 50(a)(6) lien are governed by Section 50(f) and have their own specific requirements.
- ✦80% CLTV maximum: constitutional restriction on all Texas homestead home equity transactions
- ✦12-day waiting period: 12 calendar days from disclosure delivery to closing; plan your timelines accordingly
- ✦One-lien rule: only one outstanding home equity lien on a Texas homestead at a time
- ✦Non-homestead: these restrictions apply only to homestead property; investment property cash-out follows standard guidelines
Aria can walk through any Texas-specific home equity scenario and confirm whether the structure complies with Section 50(a)(6) requirements. Ask at vicariointel.com.
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