HELOC Equity Rules for a Texas Homeowner

The Quick Read: The state constitution caps a Texas homestead line of credit at 80% combined loan-to-value, which means the new line plus every other lien on the home cannot exceed 80% of its value, and added rules govern notice, fees, draws and who must sign, while rentals and second homes sit outside most of them.

• The 80% cap applies to your primary residence (your homestead) and is a ceiling, not a target: no credit score raises it, though lower scores can pull your limit below it.
• Only one home equity lien of this kind can sit on a homestead at a time, and that single slot is shared with a homestead cash-out refinance.
• Each draw after closing must be at least $4,000, and card access is not allowed.
• On a rental property the line is an ordinary loan, and the network Lendmire places files with caps it at 70% CLTV. A second home can reach higher, up to 90% CLTV, but only with a credit profile of 720 or better.
• A HELOC is personal-credit financing, so it is a different tool from a DSCR loan, which is built around the rental’s income.

Why Does Texas Write Home Equity Rules Into Its Constitution?

Texas protects the homestead more strictly than most states, and it does that in the constitution itself rather than in ordinary lending law. That is why a rule like the 80% cap cannot be negotiated away by a lender or a strong credit score.

Texas A&M’s Real Estate Research Center explains that many of the requirements for home equity loans are written directly into the Texas Constitution. The core provision is Article XVI, Section 50(a)(6). Both a closed-end home equity loan and a HELOC fall under it when the home is your homestead.

A HELOC is a revolving line. You get an approved limit, draw against it, and repay under the line’s terms. A closed-end home equity loan hands you one lump sum. Texas treats the two as the same legal category, with a few extra rules that apply only to lines.

The practical takeaway is simple. Before you ask what a lender will offer, ask whether the property is your homestead. If it is, the constitutional rules apply first, and lender guidelines sit on top of them.

How Does a Texas HELOC Get Underwritten, Step by Step?

Underwriting a homestead line runs through a fixed sequence, and each step can stop the file. The order matters because the legal tests come before the credit review.

1. Confirm homestead status. Only your primary residence qualifies for this kind of line. A rental, a second home, or an investment property is handled differently (more on that below).

2. Check for an existing home equity lien. A home equity loan, a HELOC, or a homestead cash-out refinance already on the property uses up the single slot Texas allows. Only one can exist at a time, so a property cannot carry both a home equity loan and a HELOC.

3. Run the 80% test. Add your first mortgage balance and any other liens to the full amount of the proposed line. Divide the total by the home’s fair market value on the date the line is established. Value is set by appraisal or, on smaller lines, by an automated valuation. The result must be 80% or lower.

4. Receive the required written notice. The loan cannot close before the 12th day after the lender gives you the constitutional notice on a separate document. The constitutional text sets that waiting period. Treat it as at least 12 days.

5. Review personal credit and income. On a homestead line the lender looks at you, not at rent. Across the wholesale network Lendmire places files with, credit starts at a 600 program floor, and debt-to-income tops out at 50%, or 45% for scores from 600 to 679. The lender reviews your file on the interest-only payment calculated on the maximum draw.

6. Close with every owner and spouse. The lien must be voluntary, created in writing with the consent of each owner and each owner’s spouse.

7. Draw within the rules after closing. Minimum advances and fee limits apply from that point on.

Every figure from the network is a typical range, subject to lender guidelines and full file review. This is not a commitment to lend.

How Do You Calculate Your Maximum Line?

Your maximum line is 80% of the home’s value, minus everything already secured by the home. The full line counts against the cap on day one, whether you draw it or not.

Here is the arithmetic in percentages, so you can apply it to any home.

• Scenario A: first mortgage at 55% of value. The room under the cap is 25% of value. That is the most the line can be, before the network’s own limits.
• Scenario B: first mortgage at 72% of value. The room is 8% of value. On many homes that will fall below the network’s $25,000 minimum line, so the line may not be available at all.
• Scenario C: first mortgage at 80% of value. There is no room. A recent purchase with a small down payment often looks like this.

As an illustration, the owner of a $250,000 home with no other debt and a credit profile of 640 or better could take a line of up to $200,000, since 80% of the home’s value is $200,000. A lower credit tier would reduce that figure.

The network also stacks its own tiers on top of the legal cap. CLTV (combined loan-to-value) is every lien on the home added together and divided by its value. For a Texas primary residence, the 80% ceiling requires a 640 or better credit profile and applies to lines up to $500,000. Lower scores step the ceiling down, to 70% at 620 and 60% at 600, with smaller maximum lines at those tiers. The network’s 600 credit floor and 50% debt-to-income maximum apply alongside these tiers.

Larger lines follow a separate path. Lines above $500,000 are available on primary residences only, which in Texas means a homestead, and they cap at 75% CLTV with a full appraisal, so the 80% figure does not apply to them. The most the network offers is $750,000, though the room under your own cap usually decides the size first.

What Changes After You Close?

Each advance must be at least $4,000. You cannot use a credit or debit card, and the lender cannot send unrequested preprinted checks. Fees to originate, evaluate, record, insure, or service the line can be charged only when the line is established. The lender cannot change the line’s terms on its own, and annual maintenance or non-usage fees are not allowed. Texas A&M also notes the fees you pay cannot total more than 2% of the original principal amount, and the loan cannot carry a prepayment penalty.

Draw rules changed in 2017. Before then, a line could not advance once the balance passed 50% of fair market value. Proposition 2 removed that restriction, so you can draw freely as long as total principal stays within the line. Anything written before the amendment may describe the old limit. The Texas Legislative Council’s fact sheet on home equity lending covers the 2003 amendments that first authorized Texas HELOCs, and it describes the older draw limit, so read it as history.

The network adds its own structure on top. Lines are standalone, in first or second lien position. Primary residences and second homes can run a 3-year interest-only draw with a 17-year fully amortizing repayment, or a 5-year draw with a 25-year repayment. Investment lines use the 5-year draw and 25-year repayment only. At least 75% of the line is drawn at closing, so the revolving feature is smaller than many owners assume. Pricing floats through both the draw and repayment periods and does not convert to fixed.

Where Do the General Rules Break?

The rules above are the general case. Several situations change the answer, and some of them block a line entirely.

A HELOC plus a cash-out refinance. Both are the same kind of loan in Texas, and a homestead can carry only one at a time. If you did a homestead cash-out refinance, you cannot add a HELOC behind it.

Spacing between loans. On a primary residence, the network applies 12-month seasoning, so a recent home equity loan can push the next one out. The Texas Finance Commission has also adopted a rule allowing a home equity loan to be refinanced into a non-home-equity loan under conditions, including a year of seasoning. Confirm your own timeline with a lender before planning around it.

A property that used to be your home. Homestead status can attach without any filing. A rental you once lived in may still carry an old home equity lien, so title work should confirm what is on the property before you count on it.

Rentals and second homes. Section 50 loans may not be taken out on a secondary residence or a rental or investment property. A line on those properties is an ordinary loan, and the 80% cap, the 12-day notice, and the one-lien rule are not constitutional requirements there. In the network, a Texas second home or investment property is eligible as a non-homestead transaction. The homestead-only rules (12-day wait, one lien at a time, 12-month seasoning) bind primary residences only.

Property limits. Texas properties are limited to 10 acres. A property listed for sale, or listed within the past 60 days, is ineligible in Texas. Manufactured homes, co-ops, condotels, log homes, and commercial, mixed-use, or agricultural-zoned properties are not eligible.

Title and vesting. The property must be held by you as an individual or by your revocable living trust. An LLC cannot hold title on a line. That is a sharp difference from a DSCR loan, where an LLC is often the borrower. A property already deeded to an LLC needs a vesting change first, or a DSCR cash-out instead.

A contrast with agency loans. Fannie Mae’s Selling Guide shows the same 80% limit as a legal ceiling for any Texas Section 50(a)(6) loan. It also says agency loans do not permit HELOC subordinate financing behind such a loan. DSCR loans are not agency products, so treat that as context only.

What Do the Network’s Numbers Look Like by Occupancy?

The ceiling depends on how the property is used, so it pays to read the row that matches your own situation. Each row below is a typical range for Texas files, subject to lender guidelines.

Two notes on the table. On a Texas primary residence, 80% is the hard stop, even though the network’s matrix reaches higher tiers elsewhere. Lines above $500,000 on a homestead cap at 75% CLTV, and that is the only way the primary maximum reaches $750,000. On a second home, 85% applies at 680 to 700, 80% at 660, and 75% at 640, and the 90% tier exists only at 720 or better.

Valuation also varies. Lines at or below $500,000 ordinarily run an automated valuation with no traditional appraisal, though a higher CLTV may require a second valuation, and you can request a full appraisal at any time. A full appraisal is required on every line above $500,000.

A borrower is limited to three lines, and a borrower with more than 15 financed properties is not eligible. Availability covers Lendmire’s 16 full-service states, Texas included.

Should the Rental Be Funded by a HELOC or a DSCR Loan?

A HELOC on your homestead and a DSCR loan on the rental solve different problems. A homestead line is the lowest-friction way to pull cash from a home you live in. A DSCR cash-out refinance borrows against the rental itself and leaves your homestead out of the deal.

DSCR (debt service coverage ratio) compares a rental’s income to its full monthly obligation: principal, interest, taxes, insurance, and any HOA dues. DSCR loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage. The property qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. LLC borrowers are accepted subject to lender program eligibility.

Here is how the two compare in practice.

• Collateral. A HELOC puts your home behind the decision. A DSCR loan is secured by the rental.
• Leverage. A Texas homestead line caps at 80% CLTV. A DSCR cash-out refinance tops out around 75% LTV across most of the network, and about 6 months of seasoning is the common expectation.
• Coverage. 1.00 is where select programs start. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. Stronger coverage opens better pricing and leverage.
• Credit. A 620 floor exists in parts of the network, most programs want around 660, and 700 or better unlocks the strongest leverage tiers.
• Vesting. A line requires individual or revocable-trust title. DSCR financing can often close in an LLC’s name.

A clean 1.00 does not mean positive cash flow. DSCR compares rent to the payment only, so repairs, vacancy, management, and utilities sit outside the calculation. Size the deal for those costs separately.

Neither option wins in every case, so the choice follows where the equity sits. If your homestead has a modest first mortgage and plenty of equity, and the rental has little, the homestead line is usually the better fit, though it puts your home behind the deal. If the rental has strong equity and you would rather keep the homestead out of it, a DSCR cash-out on the rental is the cleaner route. A rental held in an LLC can stay in that structure under a DSCR loan, subject to program terms, while a line would require retitling it to you or a revocable trust. For the full picture of how these loans work, see Lendmire’s complete DSCR loans guide.

Before You Apply: A Short Checklist

• Confirm the property is your homestead and that the title shows no existing home equity lien.
• Add up every lien and run the 80% test against a realistic value.
• Check that each owner and spouse will sign.
• Compare the room under the cap against the network’s $25,000 minimum line.
• Confirm your credit score against the tier you need, since lower tiers carry lower ceilings.
• Decide whether the line or a DSCR cash-out on the rental fits the goal better.

Key Terms Defined

Homestead: the home you live in as your primary residence, which Texas protects under its constitution.

CLTV: combined loan-to-value, meaning every lien on the property added together and divided by its value.

HELOC: a revolving line of credit secured by your home, which you can draw against up to an approved limit.

Draw period: the stretch of time when you can borrow against the line, usually with interest-only payments.

Nonrecourse: a loan where the lender can take the home through court order but cannot pursue you personally for the shortfall.

Seasoning: the waiting period a lender wants between events, such as between one equity loan and the next.

DSCR: the ratio of a rental’s income to its full monthly obligation, used to qualify rental-property loans.

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. You can reach the team at 828-256-2183 or request a quote through the Lendmire quote page.

About Lendmire

As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and real estate investors in its 16 full-service states open home equity lines of credit arranged through wholesale lenders. Lendmire is never the lender; line amounts, ceilings and terms are set by the lender under its guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. Texas A&M Real Estate Research Center

2. Texas Constitution, Article XVI, Section 50

3. Texas Legislative Council fact sheet

4. Fannie Mae Selling Guide B5-4.1-03