The Quick Read: Usually, yes, once the cash-out loan is at least a year old and the new loan meets four conditions in Texas law. The refinance can’t give you any cash back. The new loan plus every other lien on the home can’t exceed 80% of its appraised value. A lender also has to deliver a specific notice on schedule. Miss any one of these and the loan stays a cash-out loan.
Texas treats “cash-out” differently from the rest of the country, and that difference trips up a lot of homeowners. The sections below cover the rule, the four conditions, the common scenarios, and what to do if you don’t qualify yet. Program details are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
Why Does Texas Treat a Prior Cash-Out Differently?
Texas homestead equity loans fall under Section 50(a)(6) of the state constitution, and that label has followed a loan for years. A borrower who took equity out of a homestead used to be stuck with that status. Refinancing the loan could only produce another equity loan, with all the same limits. Lenders called it “once an A6, always an A6.”
That rule changed with a 2017 constitutional amendment. The Texas Legislature’s analysis of S.J.R. 60 explains that a refinance meeting the Section 50(f)(2) requirements is treated as an ordinary Section 50(a)(4) refinance. An affidavit signed by the owner and spouse, acknowledging those conditions, establishes that status. Older articles and some lender web pages still repeat the pre-change rule, so check the date on anything you read.
Here’s the catch. You don’t get the status automatically. You get it by meeting the conditions, every time.
What Are the Four Conditions?
All four must be met, and the Finance Commission’s rule at 7 TAC §153.45 spells out the details.
1. Timing. The refinance can’t close before the first anniversary of the cash-out loan’s closing date. The refinance closing date is the day you sign the loan agreement.
2. No extra money. The new loan can’t advance funds beyond paying off existing debts plus the actual costs and reserves the lender requires.
3. 80% cap. The new loan plus all other debts secured by the homestead can’t exceed 80% of fair market value on the date of the refinance.
4. Disclosure. The lender must give you a specific refinance notice on a separate document. Per the Texas credit union department’s rule text, it is due no later than the third business day after you apply, with the timing before closing varying by file and lender.
Across the wholesale programs Lendmire places files with, the 80% cap and the no-cash condition are where most of these files get decided. The one-year clock is easy to check. The disclosure is a lender task. Value and cash back are the two items that sit in the borrower’s hands.
Which Scenario Are You In?
The answer depends on where you sit today. Here is how the common situations sort out.
| Your situation | Regular refinance available? | What decides it |
|---|---|---|
| Cash-out loan under one year old | No, not yet | The first anniversary of the closing date |
| Cash-out loan over a year old | Often yes | Appraised value against the 80% cap |
| Cash-out loan already paid off | Usually not an issue | Whether the new loan is a new equity loan |
| Prior cash-out was a HELOC | Depends | Remaining lines count toward the 80% |
| Already converted in a past refinance | Usually yes | Standard refinance rules apply |
| Home has lost value since | Maybe not | Combined debt must still fit under 80% |
A few of these deserve more detail.
Under a year. Only another equity loan could follow, and that carries the same one-year bar. Waiting is the practical move. A modification of the equity loan is a different path. Per 7 TAC §153.14, a modification within the first year isn’t barred, but it is treated as one transaction with the original.
A second lien or HELOC. Any other lien left on the home counts toward the 80% limit. A borrower with a first mortgage from a prior cash-out and a line of credit on top may find the combined number is the real obstacle.
Value drop. The original cash-out met the cap when it closed. The new test uses today’s value. If the home has lost value, the same debt may now sit above 80%.
What Does the Process Look Like?
Short answer: it looks like a standard refinance with Texas paperwork layered on top.
1. Confirm the age of the cash-out loan. Count from its closing date, not your first payment.
2. Tell the lender the goal. The refinance must be identified as a no-cash refinance of the equity loan. The three-business-day clock starts when you apply for that purpose. If you first applied for something else, it starts when you change the application, orally or in writing, to specify the refinance.
3. Receive the notice. Planning around the waiting period that follows delivery of the notice avoids surprises.
4. Get the appraisal. The 80% test uses value on the date the refinance is made, so the appraisal is the practical decider.
5. Size the loan. The new principal is the amount advanced plus financed charges. Only costs the lender actually requires can be financed, and escrow reserves are treated the same way. Money you pay out of pocket at or before closing isn’t counted as an advance.
6. Underwrite as a standard refinance. Ordinary credit, income, debt-ratio, appraisal and title requirements apply.
7. Sign and close. The owner and spouse sign the affidavit and acknowledgments that lock in the status.
A 50(a)(4) loan that pays off a 50(a)(6) loan and meets the Texas requirements is eligible as a “no cash-out” refinance.
A warning applies here. Agency “cash-out” and “no cash-out” terms may not match their meaning under the Texas Constitution. Texas law decides the label, not the lender or the agency. Fannie Mae‘s Selling Guide separates Texas 50(a)(6) loans classed as cash-out from those classed as limited cash-out, and agency guides generally treat a compliant no-cash payoff as a no-cash-out refinance.
Rate-and-term refinancing on a principal residence can reach 95% leverage nationally, and 97% where the existing loan is agency-owned and the first-time-buyer program allows it. On a Texas 50(f)(2) refinance, those national figures don’t help you. The 80% cap still applies on top. Mortgage insurance, which is required above 80% elsewhere, doesn’t come into play at that ceiling. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Can an FHA Streamline or VA IRRRL Help?
Rarely. The FHA Streamline refinances an existing FHA-insured loan that is current, and it needs a net tangible benefit. The VA IRRRL refinances an existing VA loan. A prior Texas cash-out loan is a conventional equity loan, so neither streamline generally has anything to refinance, and some lenders bar Texas equity-loan refinances from the Streamline outright.
Moving into an FHA or VA loan after the 50(f)(2) conditions are met may be possible in some files. That is a question for the lender, not a given.
Key Terms Defined
Section 50(a)(6) loan: A Texas home equity loan, the state’s version of a cash-out loan against a homestead.
Section 50(a)(4) refinance: A standard refinance of existing homestead debt with no equity cash taken out.
Section 50(f)(2): The part of the Texas Constitution that lists the conditions for refinancing an equity loan as an ordinary loan.
Fair market value: The home’s value on the day the refinance is made, usually set by an appraisal.
Limited cash-out refinance: An agency term for a refinance that pays off the existing mortgage and costs, with only incidental cash back.
What Mistakes Break the Exit?
- Taking “a little” cash back. Any advance beyond payoff and required costs pulls the loan out of the 50(f)(2) path and back toward a new equity loan with stricter limits.
- Counting from the wrong date. The year runs from the equity loan’s closing date, not from your first payment.
- Forgetting other liens. A second lien or HELOC counts toward the 80%.
- Trusting the label. A lender calling it “rate-and-term” doesn’t make it one under Texas law.
- Applying for one thing and switching. The notice clock follows the application’s stated purpose, so tell the lender the goal at the start.
- Relying on old advice. Content written before the 2017 change often says no exit exists.
What If You Don’t Qualify Yet?
You have four reasonable moves, and the right one depends on why you fell short.
If the loan is under a year old, waiting is the cleanest answer. The anniversary is a fixed date, and you can plan the application around it.
If value is the problem, a smaller new loan can fit under the cap. Paying down a second lien or HELOC first may help, since every lien counts. Whether paying in cash to close the gap makes sense depends on your reserves and goals.
If you were hoping for cash, a regular refinance isn’t the tool. A Texas equity loan or a new cash-out is a different product with its own limits. The Texas A&M Real Estate Research Center also explains that Texas cash-out loans fall into three groups: cash-out refinances, home equity loans and HELOCs.
If the goal is a different loan structure, ask whether the new loan fits the standard refinance lanes at all. Lendmire’s cash-out refinance programs are the comparison point if you decide equity access matters more than a clean conversion.
What Does the Conversion Change for You?
A refinance that lands as a 50(a)(4) loan sheds the equity-loan limits. The required notice warns that some equity-loan protections are given up, so read it rather than signing it past. In exchange, you get a standard first-lien loan, and future flexibility improves.
Planning matters here. If you took the original cash-out expecting to refinance later, the one-year clock and the 80% cap were the two numbers to protect. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Frequently Asked Questions
How soon can I refinance after a Texas cash-out?
Not before the first anniversary of the cash-out loan’s closing date. After that, a no-cash refinance can convert the loan to a standard 50(a)(4) loan if it meets the other conditions. A new equity loan faces the same one-year bar.
Does a paid-off cash-out loan still count against me?
Generally the issue is the loan you are refinancing now, not one that is gone. What matters is whether the new loan advances cash and whether total liens fit under the 80% cap. A lender reviews the title and loan history to confirm how each prior loan is classified.
Can I take a little cash out in a conversion refinance?
No. The 50(f)(2) path allows only payoff of existing debts plus actual costs and reserves the lender requires. Any extra advance puts the loan back into equity-loan territory with stricter limits. Money you bring to closing isn’t counted as an advance.
Does the 97% limited cash-out option apply to my Texas home?
No, not for a conversion. Agency programs reach 95% or 97% on a rate-and-term refinance in other contexts, but a Texas 50(f)(2) refinance is still capped at 80% combined debt against fair market value. Eligibility is subject to lender guidelines and full file review.
Can I use an FHA Streamline or VA IRRRL on a conventional cash-out loan?
Generally not. Both programs refinance existing FHA or VA loans, and a conventional equity loan is neither. Some lenders bar Texas equity-loan refinances from the Streamline outright. Ask whether a standard FHA or VA refinance is possible after the conditions are met.
If you are weighing a cash-out refinance against keeping the loan you have, Lendmire can help you compare the programs and the equity each one reaches. The deciding numbers on a Texas homestead are the loan’s age, the appraised value, and whether a dollar of cash comes back to you.
For your own numbers, request a scenario review with Lendmire.
For current guidelines and terms, see Lendmire’s refinance programs page.
About Lendmire
Lendmire — NMLS# 2371349 — is a mortgage broker that arranges FHA, VA, conventional and jumbo home purchase and refinance financing in 16 states through wholesale lenders. Every option is subject to the lender’s guidelines and full underwriting. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Texas Legislature, S.J.R. 60 analysis
3. 7 TAC §153.45 (Texas credit union department)
4. 7 TAC §153.14 (Texas credit union department)
5. Fannie Mae
6. Texas A&M Real Estate Research Center
This article is part of Lendmire’s Refinance series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: How to Remove Your Ex From Title and Note With a Cash-Out Refinance · Can a Texas Cash-Out Refinance Be Refinanced Again for a Lower Payment? · Texas Cash-Out Refinance Rules When You Have a Low First Mortgage
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.