The Quick Read: Yes, with one catch. The cash-out loan can only be secured by your Texas homestead, so it cannot be the loan on the second home. The cash it produces can go toward buying that second home, because Fannie Mae’s Texas section bars only using the proceeds to buy or improve the homestead itself. The second home then needs its own mortgage and its own approval.
What Is a Texas Homestead Cash-Out Loan?
Texas treats a cash-out refinance on a homestead as a special loan. People call it a “50(a)(6)” loan or an “A6” loan, after the section of the Texas Constitution that created it. The state sets rules that lenders cannot waive.
The big one is the equity cap. The new loan, added to every other lien on the home, cannot exceed 80 percent of the home’s fair market value, per Article XVI of the Texas Constitution. The loan is also non-recourse in most cases. That means the lender generally cannot chase your other assets if the home sells for less than you owe.
A Texas homestead cash-out refinance is typically a first-lien loan. The new loan pays off your existing mortgage and replaces it. Across the wholesale programs Lendmire places files with, the conventional cash-out limit on a one-unit primary residence is 80% LTV. (LTV, or loan-to-value, is the loan balance divided by the home’s appraised value.) In Texas, the constitution lands on the same number. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
If you want the broader program picture, Lendmire’s page on cash-out refinance programs covers how these loans work outside Texas.
Why Can the Cash Buy a Second Home?
Because the rule limits the collateral, not the spending. Fannie Mae says it has no other restrictions on how you use the proceeds. A second-home purchase is not acquiring the homestead, so the money is yours to use.
Two cautions. First, that “no restrictions” language is Fannie Mae’s rule. Confirm the specific program and investor before assuming it carries over. Second, the second home is not pulled into the Texas loan. It sits on a separate mortgage, with a separate lien.
Many search results blur this. Some pages say cash-out is allowed on second homes. Others say it is homestead-only. Both can be true. Cashing out of a second home you already own is one loan. Cashing out of your homestead to buy a second home is another. This article covers the second.
What Does the Second Home Have to Be?
A true second home has a narrow definition. Under Fannie Mae’s occupancy rules, it must be:
- A one-unit property
- Occupied by you for some part of the year
- Suitable for year-round living
- Under your exclusive control
- Not a rental or timeshare arrangement
Rental income cannot be used to qualify you for a second-home loan. If you plan to rent the place out, the lender treats it as a different occupancy type, and leverage drops. On the standard programs, second homes reach 90% LTV on a purchase, while investment property is capped lower. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Occupancy decides the leverage, so be honest with the lender about how you will use the property.
How Does the Process Work, Step by Step?
Think of it as two loans that must fit together.
1. Check the seasoning. The first mortgage being paid off must be at least 12 months old, measured note date to note date. At least one borrower must have been on title for six months. Both are Fannie Mae’s cash-out rules.
2. Order the appraisal. Fair market value must come from an appraisal, and it drives the 80% cap. Desktop Underwriter does not contain the Texas rules, so an “Eligible” finding alone does not prove Texas compliance.
3. Build in the notice period. The constitution says the loan may not close before the 12th day after the lender gives you written notice. If you have a contract on the second home, set its dates with that wait in mind.
4. Close the refinance. Texas requires special uniform loan documents and title endorsements. Your lender handles these. Fannie Mae also requires the first payment to fall due no later than two months after closing.
5. Apply for the second-home mortgage. The lender counts your new homestead payment and reserves for both properties. The cash from the refinance can be documented as refinance proceeds.
Qualifying for Both Loans
This is where most plans get tested. The new homestead loan is larger than the old one, so its payment may rise. Then the second home adds another payment, plus taxes, insurance, and upkeep.
Lenders look at your debt-to-income ratio (DTI), which compares your monthly debts to your monthly income. Across the wholesale conventional programs we place files with, the automated finding governs most files, with a total ratio ceiling of 50%. Manually underwritten loans are held to 36% or 45%, depending on the reserve and score factors. Cash-out files with a DTI above 45% on Fannie Mae’s automated system need six months of reserves.
Credit matters too. The wholesale conventional programs start at a 620 decision score, though a higher score generally widens your options. Everything here is subject to lender guidelines and full file review. Nothing here is a commitment to lend.
Here is a quick picture. Say you own a Texas home appraised at a healthy figure, with a modest mortgage. The 80% cap sets the ceiling on all liens combined. Subtract your existing balance, and that gap is the most the cap allows you to cash out. Whether you should take all of it is a separate question. The second home’s down payment is a percentage of its price, on a loan that can reach 90% LTV as a second home, so the cash you need is smaller than many people expect. You then still need reserves on both properties. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Does FHA or VA Work for This?
Mostly not. Both programs have occupancy rules that make this plan awkward.
FHA. A standard FHA cash-out refinance is for owner-occupied primary residences, and the borrower generally needs 12 months of occupancy. The FHA Streamline is a no-cash-out product by design, so it cannot generate money for a purchase. It requires an existing FHA loan, a net tangible benefit, and no appraisal.
VA. The VA IRRRL (the VA’s streamlined refinance for existing VA loans) carries a funding fee unless you are exempt, and it requires the later of 210 days and six payments of seasoning. It does not provide cash. A VA cash-out is a different loan with its own occupancy certification, a new appraisal, and a new credit check. Financing a vacation home with VA money is generally not allowed, so verify with VA directly.
If you hold an FHA or VA loan today, a conventional cash-out refinance on the homestead is often the practical route. That swap changes your mortgage insurance picture, so compare the full cost.
What About a HELOC or Home Equity Loan Instead?
A different option can leave your first mortgage alone. The CFPB explains that a cash-out refinance replaces your existing mortgage. A home equity loan is a second mortgage with its own payment.
In Texas, a home equity loan or line against the homestead is also an A6 transaction. A Texas homestead generally allows one A6 loan at a time, so the order matters.
The tradeoff is simple. A cash-out refinance resets your whole mortgage, rate and term included. That helps if your current terms are weak. It hurts if you hold a mortgage you like. A separate equity loan keeps the first loan intact, though it adds a payment.
What Are the Risks?
Your primary residence becomes the source of money for a property you do not live in most of the year. The CFPB is direct about the downside: miss payments, and you could lose the home to foreclosure. Cash-out refinances also tend to carry larger balances and payments than other refinances. The CFPB notes the payment may rise and the payoff may stretch out, since the new loan is bigger.
Texas non-recourse protection helps, but it does not erase the debt on a second home, which carries its own loan. A default on either property can pressure the other.
Run these checks before you commit:
- Can you carry both payments if one property sits empty for a stretch?
- Do you have reserves for both properties?
- Does the equity left in the homestead still feel like a cushion?
- Will the wait and the appraisal fit your purchase contract dates?
A practical note from placing these files: the appraisal drives everything. A value that comes in lower than expected shrinks the cash available, and the second-home contract may already be signed. Many borrowers sequence the refinance first, then shop. Others hold off on the contract until the cash-out funds are secure.
Another trap involves homestead status. A second home is not a homestead. If you move out of your current home, it may stop qualifying as one, and the occupancy rules change. Ask a Texas attorney. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Key Terms Defined
50(a)(6) loan: The Texas Constitution’s name for a cash-out loan secured by a homestead. Also called an “A6” loan.
Homestead: Your Texas primary residence, which carries special legal protections.
LTV (loan-to-value): Your loan balance divided by the property’s appraised value.
Seasoning: The required waiting period you have owned the home or held the loan before refinancing.
Non-recourse: A loan where the lender cannot generally pursue your other assets beyond the home.
DTI (debt-to-income): Your monthly debts divided by your monthly income.
Frequently Asked Questions
Can I buy a house with a Texas cash-out refinance?
Not directly. The refinance is secured by your homestead and cannot be the purchase loan. The cash it produces can go toward buying a second home, which then needs its own mortgage.
Can I cash out on a second home in Texas?
Yes, that is a separate loan. The Texas 80% cap applies to homesteads, and a second home is not one. Program limits for second-home cash-out vary by lender, so ask which rules apply to your file.
Can I have a HELOC and a cash-out refinance at once?
Usually not on the same homestead. Texas generally allows one A6 loan at a time, and a home equity loan or line counts as one. Sequence them carefully, and ask your loan officer how any existing equity loan will be handled.
Does the second home have to be in Texas?
No. The Texas rules govern the homestead loan only. The second home follows the rules of its own location and its own mortgage program.
How long must I wait before cashing out?
The mortgage being paid off must be at least 12 months old, and a borrower must be on title for six months. Texas also requires a notice period before closing. Exceptions exist for delayed financing, inheritance, and legal awards.
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. Lendmire’s related piece Cash-Out Refinance to Buy a Second Home: Using Your Primary Residence’s Value for the Down Payment is a good next read.
For your own numbers, request a scenario review with Lendmire.
For current guidelines and terms, see Lendmire’s refinance programs page.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and home buyers in 16 states with FHA, VA, conventional and jumbo purchase and refinance loans arranged through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and the agency guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
Get Started
Ready to find the right loan for you?
In about 30 seconds you can review financing options available for your home or investment property. No commitment required.
Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. Fannie Mae Selling Guide B5-4.1-01: Texas Section 50(a)(6) Loans
2. Texas Constitution, Article XVI (Justia)
3. Fannie Mae Selling Guide B2-1.1-01: Occupancy Types
4. CFPB: Using home equity to meet financial needs
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: Can a Texas Homestead Cash-Out Refinance Get a Lower Payment Later? · How to Qualify for a Cash-Out Refinance on a Free-and-Clear Home · Can a Cash-Out Refinance on Your Primary Home Fund a Second Home?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.