Home Equity Line of Credit · Texas
HELOC in Texas: The Rules That Only Apply Here
Texas writes home equity rules into its constitution, and a line of credit on a Texas homestead follows Section 50(t). Here is what that changes about how much you can borrow, how you draw it, and how long it takes.
Overview
The most protective home equity rules in the country.
Texas was the last state to allow home equity borrowing at all, and when it finally did, it wrote the terms into the state constitution rather than leaving them to lenders. Article XVI, Section 50(t) governs lines of credit on a Texas homestead. The headline limit is that your credit line plus every other lien on the homestead cannot exceed 80% of fair market value when the account is established, which is a harder ceiling than the 85% or 90% available in most states. Each advance must be at least $4,000, no fee can be charged on a draw, and you cannot access the line with a credit card or debit card. Fees to originate are capped at 2% of the credit limit, excluding third-party appraisal, survey, title policy premium and discount points. The loan cannot close until the twelfth day after you apply or receive the required notice, you and your spouse both have three days to rescind afterward, and the lien requires the consent of every owner and every owner’s spouse, even one not on title. Two more Texas-only points: the loan is nonrecourse, so no deficiency judgment can follow you, and there is never a prepayment penalty.
Licensed in Texas · NMLS 1352284 · Texas mortgage lending · HELOC overview
Who it is for
Is a Texas HELOC right for you?
- Texas homeowners with meaningful equity below the 80% ceiling
- Owners who want to draw in stages rather than take a lump sum
- Borrowers who can work with a $4,000 minimum per advance
- Homeowners with no other home equity loan on the homestead
- Investors borrowing against non-homestead property, where Section 50 does not apply
- Not a fit if you need above 80% combined loan-to-value or need to close in under two weeks
Highlights
What Section 50(t) changes
80% is the ceiling
Your line plus all other liens on the homestead cannot exceed 80% of fair market value at account opening. Other states commonly allow 85% or more.
$4,000 minimum draw
Every advance must be at least $4,000, and the lender cannot charge you a fee for taking one.
No card access
Texas prohibits drawing on a homestead line with a credit card, debit card or preprinted solicitation check. Draws go through the lender, transfer or borrower-requested checks.
A 12-day clock
The account cannot close until the twelfth day after your application or the required notice, whichever is later, plus a one-day wait after the final fee itemization.
One at a time
You may have only one home equity loan or line on the homestead, and you cannot close another within a year of the last one.
Nonrecourse, no prepay penalty
No deficiency judgment against you or your spouse absent actual fraud, and no prepayment penalty is ever allowed. If the lender fails to comply and does not cure, it can forfeit principal and interest.
Questions
Texas HELOC questions
How much can I borrow with a Texas HELOC?
Start with 80% of fair market value, then subtract every lien already on the homestead, including your first mortgage. That result is the most your credit line can be at account opening. On a $600,000 home with a $380,000 mortgage, that is $600,000 x 0.80 = $480,000, minus $380,000, or $100,000. Run your own numbers with the HELOC calculator.
Can I get a Texas HELOC on a rental property?
Not under Section 50, because Section 50 governs the homestead only. That is not a prohibition on borrowing against a rental: a lien on non-homestead property is an ordinary mortgage outside the homestead rules, so the 80% cap, the 12-day notice, the fee cap and the nonrecourse protection do not apply either. See HELOC on an investment property.
Can I have two home equity loans in Texas?
No. The constitution allows only one home equity loan or line on a homestead at a time, and you cannot close a new one within twelve months of closing the last one.
Why does a Texas HELOC take longer to close?
The 12-day notice period is constitutional and cannot be waived, so a Texas homestead line cannot close as fast as the 5 to 10 days available elsewhere. Everything else about the process — the digital application, connecting accounts, the automated valuation — still moves quickly; the clock is the only fixed cost.
Ready to run your Texas numbers?
Send me your value and current balance and I will tell you where the 80% ceiling puts you before you apply.
Home equity lines of credit are offered through Citywide Home Mortgage, a Guaranteed Rate company. Credit limits, rates, fees, draw and repayment periods, property types and state availability depend on credit, combined loan-to-value, occupancy and program guidelines and are subject to change; full terms, rates and disclosures are provided in the application. This page is educational and is not an offer or commitment to lend, and is not financial, tax or legal advice. A home equity line of credit is secured by your home; failure to repay may result in loss of the property. All loans are subject to credit approval and property valuation. David Silva, NMLS 1352284 – Licensed in Colorado, California, Georgia and Texas – Equal Housing Lender. Texas home equity lines of credit are governed by Article XVI, Section 50 of the Texas Constitution; the summary here is educational and not legal advice. Confirm current requirements with your lender and, where appropriate, an attorney.