Texas Home Equity Rules for a HELOC Second Lien

The Quick Read: A HELOC on a Texas primary residence is governed by Article XVI, Section 50 of the Texas Constitution, not by ordinary lender preference. Combined debt against the homestead cannot exceed 80% of fair market value, only one Section 50(a)(6) lien can sit on the home at a time, and each draw must be at least $4,000. Rentals and second homes fall outside those homestead rules.

• The 80% combined cap applies to a Texas primary residence and is measured on the date the line is established.
• A HELOC and a closed-end home equity loan cannot coexist on the same homestead.
• Section 50 loans cannot be taken against a rental or investment property.
• Proceeds can fund a down payment on a separate rental purchase.
• Lender overlays sit on top of the law and are a separate test.

Investors in Texas often hold equity in a home they live in and want to put it to work on rentals. That is where the constitutional rules matter, because they decide which structure is even available. This article walks through what the rules say, how a second-lien HELOC fits behind a first mortgage, and where the rules stop applying.

What Section 50 Actually Is

Texas homestead protection and Texas home equity lending live in the same place: Article XVI, Section 50 of the Texas Constitution. The Texas Real Estate Research Center at Texas A&M explains that the section shields the homestead from forced sale and also contains the home equity lending provisions. It lists three loan categories: cash-out refinance, home equity loan, and HELOC.

A home equity loan in Texas is a separate second mortgage. It does not replace the first loan. A HELOC is the revolving version of the same idea. Both are called Section 50(a)(6) loans, which is why the one-lien rule below catches them together.

No federal agency writes these rules. The full text is public through Justia’s copy of the Texas Constitution, and a lender can’t waive any of it.

How the 80% Cap Works Behind a First Mortgage

The cap is a combined number. The principal of the new line plus every other debt secured against the home cannot exceed 80% of fair market value on the date credit is extended. For a HELOC, the constitutional notice language states the same cap, measured on the date the line is established.

Step by step, the math is simple:

1. Take the fair market value on the establishment date.

2. Multiply by 80%.

3. Subtract the first mortgage balance.

4. Subtract any other secured debt, such as an improvement lien or a tax lien.

5. What is left is the most the line can be.

Two points trip files up. First, value is fixed as of the line’s establishment date, so appraisal timing matters. A value that moves later does not change the cap math on a line already in place. Second, other secured balances count. A first lien plus a solar or improvement lien shrinks the room, even if the borrower thinks of them as separate.

Layer this on the network’s own tiers. For Texas primary residences, the combined ceiling is 80%, and no higher primary tier applies in this state. Across Lendmire’s wholesale network, the stronger credit profiles unlock the upper tiers of the matrix, but a Texas homestead never reaches past 80% combined. Every figure is subject to lender guidelines and full file review.

The Second-Lien Trap

The biggest structural rule is the one-lien limit. Because a closed-end equity loan and a HELOC are both 50(a)(6) loans, a single property cannot carry both.

That creates a trap many borrowers miss. If the existing first mortgage is itself a Section 50(a)(6) loan, the home already carries its one lien. A HELOC placed behind it is a second 50(a)(6) lien, and the structure fails. The same is true in reverse: opening a 50(a)(6) HELOC can block a later home equity loan on that homestead.

So the first check on any Texas file is the payoff history. Pull the closing documents on the existing first lien and confirm whether it was a Section 50(a)(6) loan. If it was, title counsel needs to review how later refinances are treated under Section 50(f) conditions. This is a title question, not a pricing question, and it should be answered before anyone orders a valuation.

A second, quieter point: a prior home improvement or other secondary lien may be allowed if it is subordinated, but the 80% cap still counts it.

HELOC-Only Rules

A HELOC has its own subsection. Under Section 50(t) of the Texas Constitution, the line is an open-end account where the owner requests advances, repays, and reborrows. The rules that follow from it:

• Minimum advance: each draw must be at least $4,000. Many lenders elsewhere allow small draws. Texas does not.
• Access method: credit cards, debit cards, and preprinted solicitation checks cannot be used to draw.
• Fees: charged only when the line is established, none per advance.
• No unilateral changes: the lender may not amend the terms on its own.
• The 50% advance block: if the balance passes 50% of fair market value as set at establishment, further advances stop until the balance falls back below 50%.

The network’s program figures echo the draw rule. After closing, Texas lines carry a $4,000 minimum subsequent draw, against $1,000 elsewhere in the network. Draws are made by the borrower requesting funds, not by card.

Other Conditions on Any Texas Primary-Residence Line

The Texas Legal Guide’s reproduction of the constitution text lists the further conditions of a 50(a)(6) loan:

• The lien must be voluntary and consented to by each owner and each owner’s spouse.
• The loan can be paid in advance without penalty.
• It cannot be accelerated because the home’s market value drops.
• Closing cannot happen before the 12th day after the later of the application date or the date the required notice is given. Confirm that language against the full text with title counsel, since the details of what starts the clock matter.

The borrower notice required by the constitution also covers the 3-day right of rescission and the fair market value acknowledgment. These are consumer-side steps tied to the homestead. They sit in the law, not in a lender’s menu of options.

Two layers of timing apply to a primary residence. The 12-day wait is the constitutional waiting period described above. The 12-month seasoning rule is a separate network requirement: on a Texas primary residence, the network expects roughly a year to have passed since a prior home equity loan or line before a new one is placed. Both bind primary residences only, so a plan that assumes a same-month draw usually misses. Every seasoning requirement is subject to lender guidelines and file review.

Two practical consequences. First, a married borrower should expect the spouse to sign. Second, the waiting period and the seasoning requirement should be on the calendar before the application goes in, not discovered afterward.

Where the Rules Stop: Rentals and Second Homes

Section 50 loans cannot be taken against a second home or a rental. The A&M research center states this directly. That does not mean Texas bans lending against those properties. It means the Section 50 loan, and its 80% cap, one-lien rule, and waiting period, do not attach to non-homestead property.

In Lendmire’s network, a Texas second home or investment property is a non-homestead transaction and follows its own tables. On a second home, the ceiling reaches 90% combined only at a 720-or-better credit profile, with a 640 minimum. On an investment property, the ceiling is 70% combined at a 700 minimum credit profile, with a maximum line of $500,000. Texas properties are limited to 10 acres, and a property listed for sale, or listed within the past 60 days, is not eligible. Those are network guidelines, not law, and each is subject to lender review.

Also note a structural point. A Section 50(a)(6) loan may not be secured by any additional real or personal property beyond the homestead. That is why a homestead line cannot be cross-collateralized with a rental. Two Texas properties also means only one homestead; the one-lien rule attaches to that one.

Key Terms Defined

Homestead: the Texas property a borrower lives in as a primary residence, which receives constitutional protection from forced sale.

Section 50(a)(6): the constitutional provision that governs home equity loans and HELOCs on a homestead.

Combined loan-to-value (CLTV): all debt secured against the home, divided by its fair market value.

Second lien: a loan that sits behind a first mortgage in repayment priority.

Fair market value: the home’s value on the date the loan or line is established, which fixes the cap.

Seasoning: the minimum time that must pass after a prior home equity loan or line before a new one can be placed on a primary residence.

How This Fits an Investor Plan

Here is the practical decision, in order.

1. Confirm what the property is. A primary residence is a homestead and brings every rule above. A second home or rental does not.

2. Check the existing first lien. If it is a Section 50(a)(6) loan, expect title review before a HELOC can sit behind it.

3. Run the 80% math on the establishment-date value, less every secured balance.

4. Decide if a HELOC is the right shape. The $4,000 minimum draw and the 50% advance block suit a planned deployment better than frequent small draws.

5. Compare it with the alternative. Pulling equity from a rental runs through different programs.

Use of proceeds is not restricted by the constitution, so a homestead line can fund the down payment on a rental. The rental purchase then runs as its own file. Many DSCR loans in the network start from 75%-80% LTV on a purchase, with coverage evaluated on rent against the full monthly obligation, subject to lender guidelines. The complete DSCR loans guide covers how those files are reviewed.

For investors who hold equity in a rental rather than a homestead, the structure changes. Lendmire’s network offers a standalone line on an investment property at up to 70% combined, in a first or second lien position, with title held by the individual borrower or a revocable living trust, not an LLC. A property already deeded to an LLC needs a vesting change, or a DSCR cash-out refinance instead. Lendmire’s piece Can a Texas Second Home Hold a HELOC Beside a Cash-Out Lien? covers the second-home case, and Lendmire’s guide to the cap rules on a Texas homestead goes deeper on the home equity loan versus cash-out comparison.

Common Misreadings

• Texas bans equity loans on rentals altogether. It bans only the Section 50 loan on non-homestead property. Other lending against that property is not governed by Section 50.
• A HELOC and a home equity loan can coexist. They cannot, under the one-lien rule.
• Small draws are fine. Each advance has a $4,000 minimum.
• The 80% is based on current value. It is based on value on the date the line is established.
• A card can be used to draw. Cards, debit cards, and preprinted solicitation checks are barred.

Lender fee commentary often cites a 2% cap on lender fees. Treat that figure carefully and have counsel confirm it against the primary text before relying on it.

What a Violation Means

A lien on a homestead is invalid unless it secures a debt the constitution lists. That is why lenders insist on compliance and why a borrower should want a clean file too. The practical protection is attorney review of the documents and a title search that confirms no prior 50(a)(6) lien.

If you are considering a home equity line and want to see how the numbers work, Lendmire can help you compare HELOC options based on the property, the equity available, credit profile, combined leverage, and your goals. Lendmire is a broker arranging financing through select lenders in its wholesale network, and HELOC availability is limited to its full-service states, which is narrower than its 41-market DSCR footprint, including Washington, D.C.

Texas homeowners who plan the sequence, homestead line first and rental file second, tend to find the constitutional limits are manageable once they are checked before the application instead of after it.

About Lendmire

Lendmire is a mortgage brokerage (NMLS# 2371349) arranging home equity lines of credit — primary-residence, second-home and investment-property lines — through a wholesale lending network in its 16 full-service states. Eligibility is determined by the lender on each file. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. Texas Real Estate Research Center, Texas A&M

2. Texas Constitution Art. XVI §50

3. Texas Legal Guide (constitution text)