Texas cash-out refinance rules: can you keep your first mortgage?

Texas homestead equity borrowing has special constitutional protections. A cash-out refinance can replace your first mortgage; a qualifying home equity loan or HELOC may let you keep it. The choice depends on the existing lien, available equity, repayment plan and lender requirements.

The familiar Texas 80% limit is a combined debt limit, not a promise that you can receive 80% of the home's value in cash. Credit, income, title and property review still matter. This guide concerns a Texas homestead; an investment property or another transaction classification needs a separate review.

Under Texas home-equity interpretations, §153.3, the new equity loan plus other outstanding recorded liens cannot exceed 80% of the homestead's fair market value when made. Financed origination charges count in principal.

Illustration, not a quote or approval: Assume an accepted $500,000 value, a $280,000 first mortgage, no other liens and no previous home-equity loan. The combined ceiling is $500,000 × 80% = $400,000. Subtracting $280,000 leaves $120,000 of arithmetic room before fees and underwriting.

If you want $60,000, a $60,000 second loan plus the $280,000 first would total $340,000, or 68% of value, before financed costs. A replacement first mortgage would need to cover the existing payoff, desired cash and applicable financed costs. Neither calculation establishes approval or net proceeds.

For a HELOC, give the lender the full proposed credit limit, initial draw and every existing line's limit and balance. An unused line is not automatically zero exposure. Ask which balances and commitments the lender includes in its legal and underwriting calculations.

Texas interpretations, §§153.12–153.14, require at least 12 calendar days after the later application or required consumer disclosure. Preclosing application/itemized disclosures generally precede closing by one business day; limited exceptions exist. A new equity loan generally cannot close until the previous equity loan's first anniversary, even if paid off; a qualifying declared-emergency exception exists.

The Texas SML mortgage report, pages 28–31, also explains that only one home-equity loan may be outstanding against the homestead at a time. If your first mortgage is already a Texas equity loan, do not assume you can simply add another equity second.

A cancellation period is separate from underwriting and the Texas preclosing wait. The CFPB's rescission explanation describes the three-business-day cancellation right for most non-purchase-money mortgages and when that clock starts. Ask the closing team for your actual signing and funding dates; these waiting periods are not a promised turnaround time.

No. A cash-out first mortgage replaces the existing first loan. If the old loan has favorable terms, evaluate the cost of repricing its entire balance alongside the new money.

A home equity loan supplies a lump sum. It may have a fixed or adjustable rate; confirm the actual product. A HELOC provides reusable borrowing during a draw period, usually with a variable rate. When either is behind an existing first mortgage, its payment is additional to the first payment. The CFPB compares these two equity structures.

A fixed-rate second may suit a known one-time expense; a HELOC may suit staged expenses. A cash-out refinance deserves a comparison if replacing the existing first loan is itself useful. Keeping a low-rate first is a reason to compare alternatives, not a guarantee that a second mortgage costs less.

The Texas SML report, pages 29–31, summarizes a 2% covered-fee limit, with exclusions including qualifying appraisal, survey, title charges, per-diem interest and bona fide discount points. It does not mean every closing expense is capped at 2%. Ask for an itemized breakdown of included and excluded charges.

The same report identifies a $4,000 minimum HELOC advance and restrictions against drawing by credit card, debit card or preprinted check. Confirm the lender's draw method and the product's initial-draw requirements before relying on it for small expenses.

For equity loans, Texas §153.15 restricts closing to an authorized lender, attorney or title-company office. Confirm the permitted arrangement with the lender and closing team.

Compare the entire repayment plan, not the first month's payment. Put the following next to each offer:

• Your existing first mortgage's balance, rate, payment and remaining term.
• New proceeds after payoffs and fees; the HELOC's full limit and planned draw.
• Combined monthly payments now and after any draw-period ending or rate increase.
• Upfront charges, any ongoing fees, remaining balance and interest through your expected sale or payoff date.

A longer repayment term can reduce a payment while increasing total interest. Debt consolidation also moves debt onto your home. Paying off cards without changing the spending that created the balances can leave you with both the new mortgage debt and new card debt.

The CFPB explains HELOC rate changes, repayment increases and possible line freezes. If you cannot repay, your home is at risk. Compare a smaller project, saving first, unsecured borrowing or a credit-counseling plan when appropriate.

Tell Ian and the lender before choosing a route. Bring the current note, closing date and lien documents. Texas permits a different refinance classification only when its specific conditions are met; taking no new cash alone does not settle the classification. Ask the lender and title team to review the existing equity lien and Texas §153.45 before relying on an ordinary rate-and-term refinance.

Start with the property location and whether it is your homestead, an estimated value, every mortgage/line balance and limit, your current rate and payment, any previous Texas equity-loan closing date, and how much cash you need and when. We can identify which missing fact changes the comparison before you gather the whole file.

Ian Humphrey, NMLS #2224042, is a mortgage loan officer with West Capital Lending. Meet Ian or ask about your Texas equity options. Loan availability and approval require current lender review.

Reviewed November 5, 2026. Primary sources: Texas regulatory home-equity interpretations, Chapter 153; Texas Department of Savings and Mortgage Lending, 2025 report, pages 28–31; and the CFPB consumer explanations linked above. These rules do not establish a lender's current credit standards, pricing or approval. The example uses invented inputs to explain the calculation; it is not a client story.

Browse the homeowner guides or meet Ian.