How Much Can You Borrow on a HELOC Under Texas Homestead Rules?

The Quick Read: Usually your maximum line on a Texas homestead is 80% of your home’s value on the day the line opens, minus every debt already secured by the home, and then the lender’s own credit and leverage tiers can pull the real number lower than that legal ceiling. The 80% limit is written into state law, so no lender can go higher. Your first mortgage counts against it, and so does the full limit of the new line, whether you draw it or not.

• The formula: 80% of fair market value, minus all existing liens, equals the most a new line can be.
• The minimum draw: each advance must be at least $4,000.
• One at a time: a homestead cannot carry a home equity line and a closed-end equity loan together.
• Homestead only: rentals and second homes sit outside this cap and follow ordinary lender guidelines.
• Legal ceiling versus offer: your credit score, line size, and property type can still shrink what a lender offers.

The Formula: Value Times 80%, Minus What You Owe

The ceiling is simple arithmetic. Take 80% of the home’s fair market value, then subtract every lien already recorded against the home. What remains is the most the new line can be. The Texas A&M Real Estate Research Center explains that the new loan plus all other debts secured by the home cannot exceed 80% of fair market value on the date credit is extended. In practice, you keep at least 20% equity in the house.

Two details trip people up. First, the cap is 80% of value minus your debts. It is not 80% of your equity. Those are very different numbers. Second, the cap counts the whole credit limit. A notice that Texas law requires on these lines, reproduced here, refers to the maximum principal that may be extended, added to all other debts secured by the home. A line you only half draw still uses its full limit against the cap.

Value is fixed as of the date the line is established. The owner and lender sign a written acknowledgment of that value at the start. A bigger appraisal later does not reopen the math on a line already in place.

Three Worked Examples (in Percent of Value)

Percentages travel better than dollars here, because the same logic works for any home price. Say you want to know your room. Subtract what you owe, as a share of value, from the cap your lender sets.

In the first row, a homeowner who owes 40% of the home’s value can open a line of up to 40% of value. In the second, a homeowner who owes 70% has only a sliver of room left. In the third, the cap is already used up.

Now layer on the lender’s own rules. Texas sets the ceiling, but it does not set your credit minimums, your income test, or the final line size. Those are program decisions made on top of the 80% limit.

What Counts as Debt Against the Home

Add up everything secured by the homestead before you subtract. That includes:

• Your first mortgage balance.
• Any second mortgage or other recorded lien.
• The full limit of the new line.

Each of these reduces your room dollar for dollar. A recorded lien you forgot about still shows up in the title work, so it pays to know your total before you apply.

One more point about collateral. A Texas homestead equity line can only be secured by the homestead itself. You cannot pledge a rental property to stretch the homestead cap.

Key Terms Defined

Homestead: the home you live in as your primary residence, which Texas protects with special lending rules.

Combined loan-to-value (CLTV): all debts secured by the home added together, divided by the home’s value.

Fair market value: the value of the home as fixed on the date the line is established.

Advance: a single draw of money from the line after it opens.

Section 50(a)(6): the part of the state constitution that governs home equity loans and lines on a homestead.

Draw period: the stretch of time when you can borrow from the line, before repayment begins.

Rules That Shrink or Delay Your Line

The 80% cap is only one rule. Several others change how much you can actually borrow and when.

The 12-day wait comes from the constitution’s notice requirement, and the Texas A&M center covers it too. The $4,000 minimum comes from the same constitutional notice language. The fee cap dropped from 3% to 2% under a constitutional amendment, according to an Alston & Bird advisory.

A prior home equity loan or homestead cash-out refinance can also delay a new line. A one-year timing limit shows up in a Credit Union Department rule document, so confirm the current wording with your lender before you count on a date. Across the wholesale network Lendmire places files with, primary-residence lines in Texas follow the 12-day wait, the one-lien rule, and 12-month seasoning.

Lenders also tend to be cautious here. A violation of these home equity rules that goes uncured can cost a lender its entire principal and interest, so lenders stay conservative about what they will originate.

The Old 50% Rule Is Gone

You may still see pages saying Texas stops HELOC advances once your balance passes 50% of value. That rule has been repealed. A constitutional amendment known as Proposition 2 replaced it with the 80% ceiling, as the Texas House Research Organization analysis describes. If a page quotes the 50% figure, it is out of date.

What Happens After Closing

The 80% test does not disappear once the line opens. The notice language says that if your balance ever exceeds 80% of the value fixed at establishment, advances stop until the balance falls back below that level. In plain terms, paying the line down restores your ability to borrow again, up to the credit limit.

Paying down and re-borrowing is part of how a HELOC works. Each new advance still has to meet the $4,000 minimum. The structure on this network also asks that at least 75% of the line be drawn at closing, so plan for a line that starts largely used.

Why a Lender’s Offer Can Land Below the Ceiling

The 80% figure is a legal maximum. It is not a promise of an offer. On this network, the limits that sit underneath it depend on your credit score and line size. Every figure below is for a Texas primary residence and is subject to lender guidelines.

• Credit 640 or higher: up to 80% CLTV, on lines up to $500,000. Higher credit tiers exist on this network, but in Texas the state’s 80% cap is what binds.
• Credit 620 to 639: up to 70% CLTV, on lines up to $400,000.
• Credit 600 to 619: up to 60% CLTV, on lines up to $400,000.
• Lines above $500,000: primary residences only, capped at 75% CLTV, with a full appraisal. They require a credit profile of 700 or better (720 on the 5-year draw structure described below). The maximum line is $750,000.

Other limits shape the offer too. Debt-to-income tops out at 50%, and drops to 45% for credit profiles from 600 to 679. A ratio above 45% needs a 680 minimum. The network offers two draw structures on primary residences. One is a 3-year interest-only draw followed by a 17-year repayment period. The second is a 5-year interest-only draw followed by a 25-year fully amortizing repayment. Lines at or below $500,000 ordinarily use an automated valuation instead of a full appraisal, and you can request a full appraisal in any case.

Property type matters as well. Single-family homes, 2-4 units, townhomes, PUDs, and condos can qualify. Manufactured homes, co-ops, condotels, log homes, and commercial or agricultural properties are not eligible. Texas properties are limited to 10 acres, and a home listed for sale is not eligible.

Title matters too. The home must be held by you or by a revocable living trust. An LLC cannot hold title on a home equity line.

Rentals and Second Homes: Outside the 80% Cap

Here is the point investors most need to hear. The 80% rule applies to your own homestead, and the Texas A&M center notes that this type of equity loan cannot be taken on a second home, rental, or investment property. A line on a rental is an ordinary non-homestead loan. It follows lender guidelines, not the constitutional cap. If you live outside Texas and own Texas rentals, you have no Texas homestead, so these rules never attach to those properties.

So you have two separate pools of equity. Your homestead is capped by the state constitution, with the minimum draw and one-lien rule attached. Your rental equity runs through a different product.

On this network, a Texas investment-property line follows its own table. The ceiling is 70% CLTV on an investment property, the minimum credit score is 700, and the maximum line is $500,000. It uses the 5-year draw and 25-year repayment structure only. A borrower is limited to three lines, and anyone owning more than 15 financed properties is not eligible.

A DSCR cash-out refinance is the other route for rental equity. DSCR stands for debt service coverage ratio. It qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Cash-out on standard rentals tops out around 75% LTV across most of the network, with about 6 months of seasoning as the common expectation. Short-term-rental collateral caps lower, at 70% on a cash-out. DSCR loans can be written to LLC-titled borrowers, subject to program terms, which a home equity line cannot do. A property already deeded to an LLC needs a vesting change for a home equity line, or a DSCR cash-out instead.

Coverage works like this: 1.00 is where many select programs start. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. Clearing 1.00 only means the rent covers the payment. It does not mean the property cash flows after repairs, vacancy, and management. Lendmire’s complete DSCR loans guide walks through how those programs work.

HELOC, Home Equity Loan, or Cash-Out: How They Compare

All three are Section 50(a)(6) products when they take cash out of a homestead. That is why a recent cash-out on the same home can delay a new line. For more on how these lines work in practice, see Lendmire’s piece on how an investment property HELOC works under Texas homestead rules. To test your own file, see Lendmire’s guide How to Qualify for an Investment Property HELOC Under Texas Homestead Rules.

See How the Numbers Fit Your Situation

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 that arranges financing through select lenders in its wholesale network, and its home equity line programs cover Texas among 16 states. For rentals, its DSCR programs cover 41 markets, including Washington, D.C. Call 828-256-2183 to talk through your file. Texas homestead lines are about the only place where the state sets the ceiling before any lender does.

About Lendmire

Lendmire — NMLS# 2371349 — is a mortgage broker that arranges home equity lines of credit in its 16 full-service states through wholesale lenders, on primary residences, second homes and investment properties. Every line is subject to the lender’s guidelines and full underwriting. 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 Art. XVI, Section 50 notice text

3. Alston & Bird advisory on Texas home equity amendments

4. Credit Union Department rule document

5. Texas House Research Organization analysis