The Quick Read: You can leave a Texas home equity loan two ways: refinance into a new home equity loan, or convert it to an ordinary non-equity loan if it is at least a year old, takes no new cash, keeps total homestead debt at or under 80% of value, and follows a separate 12-day notice.
- Path one: a new home equity loan keeps the equity-loan protections and lets you take cash, within the loan’s limits.
- Path two: a conversion lets you pay off the old loan and closing costs, but no extra cash.
- The trade-off: a converted loan can be foreclosed without a court order and carries personal liability.
- The investor angle: once the home is a true rental, a DSCR cash-out refinance follows rental-property rules instead.
Why a Texas Equity Loan Doesn’t Refinance Like Other Mortgages
A Texas home equity loan carries lasting restrictions that follow it into any refinance. Texas protects a homestead from forced sale, and an equity loan is a deliberate exception to that protection. The state attaches strict conditions in exchange.
How large a line the equity supports in Texas.
An equity line is sized by combined loan-to-value, occupancy, and credit — not by rental coverage. Switch the occupancy or the credit band and the ceiling moves with it.
Investment-property lines require a 700 minimum credit score; second-home lines start at a 640 minimum and primary-residence lines at 600, and the combined-LTV ceiling steps down as the credit band drops on primary-residence and second-home lines and holds on investment-property lines; the line cap steps down on primary-residence lines and holds at every tier on investment-property and second-home lines.
A debt-to-income ratio above 45% requires 680+ credit. Profiles under 640 are limited to single-family homes. At least 75% of the approved line is drawn at closing. Ceilings, floors, and caps update from Lendmire’s centralized guideline source.
Line estimate
Illustrative estimate only — not a quote, Loan Estimate, approval, or commitment to lend. The rate is an editable assumption; equity-line pricing is variable through both the draw and repayment periods and never converts to fixed. Occupancy and credit drive the ceiling together: an investment property tops out at 70% combined LTV (minimum credit 700, line cap $500,000); a second home tops out at 90% combined LTV (minimum credit 640, line cap $500,000), with the ceiling stepping down as the credit band drops (the cap holds at every tier); a primary residence tops out at 80% combined LTV (minimum credit 600), and its $750,000 maximum line is available only at 75% combined LTV or below with a 700-or-better credit profile (720 on the longer-runway program) and a full appraisal. Lines above $500,000 require a full appraisal. Credit, debt-to-income, property type, and full underwriting review all affect the final line.
Lenders call this loan an A6, named for the section of the state constitution that governs it. The A6 label covers a cash-out refinance, a second-lien equity loan, or a home equity line of credit (HELOC) secured by your Texas primary residence. A HELOC is a revolving line you draw from as needed.
The old shorthand was “once an A6, always an A6.” Any refinance of the loan had to be another A6. That is still the default. Voters changed it by approving a constitutional amendment, Proposition 2, which the Texas Legislative Reference Library records as passing with 593,052 votes for and 270,780 against. That vote created the conversion exit described below.
The same amendment lowered the cap on fees you can be charged on an equity loan from 3 to 2 percent.
Key Terms Defined
A6 loan: a Texas home equity loan, whether a cash-out refinance, a second lien, or a HELOC, secured by your homestead.
A4 refinance: an ordinary refinance lien on a homestead that is not an equity loan. A converted loan is treated this way.
Conversion (50(f)(2) refinance): refinancing an existing equity loan into a non-equity loan under the conditions described below.
Homestead: your Texas primary residence, which carries special protection from forced sale.
Non-recourse: the lender can take the property but cannot pursue you personally for any shortfall.
CLTV: combined loan-to-value, the total of all loans secured by the property divided by its value.
Seasoning: the waiting period a lender or the law requires between two events, such as an equity loan closing and its refinance.
Your Two Refinance Paths
Which path fits depends on one question first: do you need cash? If you need any new cash, you are on path one. If you only want a different term or structure, path two is open when you meet its tests.
| Factor | New equity loan (A6) | Convert to non-equity |
|---|---|---|
| Goal | Refinance and take cash | Replace the loan, no new cash |
| Cash allowed | Yes, within limits | No extra advance |
| Seasoning | One year between equity closings | One year since the old closing |
| Combined debt | Capped by equity-loan rules | 80% of value or less |
| Foreclosure | Court order required | No court order needed |
| Liability | Non-recourse | Recourse |
| Future flexibility | Still an A6 | Becomes an ordinary loan |
Path one keeps your strongest homestead protections. Path two buys flexibility at the cost of those protections. Neither is better in general. The right answer follows your goal and how much risk you want attached to the house.
Can You Convert? The Eligibility Checklist
Conversion works only when every condition is met. Miss one and the loan stays an equity loan, or the new lien can be challenged. The mechanics follow a fixed checklist.
| Condition | What it means | How to verify |
|---|---|---|
| Time | One year has passed since the old equity loan closed | Closing date on the original deed of trust |
| No new cash | Proceeds only pay valid homestead liens, closing costs and lender-required reserves | Payoff statements and the settlement figures |
| Value test | All homestead debt at closing is 80% of value or less | Appraisal and payoff balances on the closing date |
| Notice | Borrower receives the conversion-specific 12-day notice at the time the rules require after applying | Dated delivery record |
Two details trip people up. The value test is measured on the new closing date, not the application date. And the notice is a different form from the one used for a brand-new equity loan, so a lender who sends the wrong one has to start the clock over.
A title company confirms the starting point. Before anyone quotes terms, the title work should show whether your current lien is an A6 and how it was documented.
How the Conversion Runs, Step by Step
1. Confirm the lien type. Pull title and the original loan documents. Make sure the existing loan really is an equity loan.
2. Check the date and the value. Confirm a full year has passed, then estimate whether all homestead debt will stay at or under 80% of value.
3. Apply and receive the notice. The lender delivers the conversion notice after your application, with timing that varies by file and lender.
4. Decide with your eyes open. The notice says you may keep the equity-loan protections or give them up. Read it, and consider talking to a Texas real estate attorney.
5. Wait out the notice period. This 12-day window is a legal waiting period, so closing cannot come before it ends.
6. Sign the companion documents. The standard set includes a terms-and-conditions agreement and an affidavit stating that the conversion requirements are met.
7. Close as an ordinary refinance. The new lien is classified as an A4 lien, an ordinary refinance lien rather than an equity lien. The loan is then underwritten under whichever program applies.
What You Can and Can’t Roll In
Anything that counts as cash to you breaks the conversion. Anything that merely pays existing obligations or the cost of the loan does not.
| Item | Allowed in a conversion? |
|---|---|
| Payoff of the old equity loan | Yes |
| Payoff of a valid purchase-money first lien | Yes |
| Closing costs | Yes |
| Lender-required reserves | Yes |
| Cash to you for any purpose | No |
| Debts unrelated to the homestead | No |
The cash trap is the one most borrowers hit. Even a modest amount of cash back moves the file into new-equity-loan territory. If you want cash, price path one instead of trying to squeeze cash into a conversion.
What You Give Up When You Convert
You give up two things: court-order foreclosure and non-recourse status. The required notice states that a home equity loan can only be foreclosed on a court order and must be non-recourse. It then warns that after conversion the lender may foreclose without a court order, and that the loan will be with recourse, meaning personal liability for you and your spouse.
For a single owner with modest debt, that may be an easy trade for a better structure. For an investor with a large portfolio, personal liability on a homestead loan deserves more thought. Your other assets sit closer to the line.
Worked Examples
These use modeled percentages, not market data.
A conversion that works. Say a homestead is appraised at a modeled value, and combined debt after the refinance would sit around 65% of that value. The old equity loan closed more than a year ago, and the new loan pays only the payoff and costs. All four tests pass. The borrower weighs the lost protections and decides to proceed.
A conversion that fails the cap. Picture a second borrower whose combined debt, after rolling in closing costs and reserves, lands near 83% of value. That is over the 80% ceiling. The options are to bring cash to closing, wait for the balance to fall, or stay put.
A case for staying in the equity loan. Consider an owner who wants a modest amount of cash and values the court-order and non-recourse protections. Path one fits better, because a conversion cannot deliver the cash anyway.
Where the General Rule Breaks
Waivers don’t automatically travel. Emergency measures have at times relaxed the one-year spacing for equity-to-equity refinances. Do not assume the same relief extends to the conversion path. Ask your lender and attorney to confirm in writing.
Paying off a first and second together. A conversion can, in some structures, pay off a purchase-money first lien and an existing equity second lien at once. The combined payoff still has to fit under the 80% value test, and your closing agent should confirm the structure before you commit.
A former homestead turned rental. Homestead protection in Texas applies on its own, without a filing, as the Texas Legal Guide to homestead protections explains. A home you once lived in can therefore carry an equity lien that surfaces in title work. That is a title and attorney question, not a routine underwriting step.
Rentals sit outside the homestead equity rules. The equity-loan restrictions attach to your homestead. A non-owner-occupied rental is borrowed against under ordinary program rules, which is why many investors run two separate tracks: one for the home they live in and one for the portfolio.
What the Investor Decision Looks Like
Start with this question: is the property still your home, or is it about to become a rental? The answer decides which rules apply.
While you live there, the home is a homestead. 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. So a homestead is not DSCR collateral.
If you want to pull equity from the homestead while you live there, two routes exist. A new equity loan is one. A home equity line through select wholesale partners is the other. On a Texas primary residence, those lines cap at 80% CLTV through the network, and the Texas waiting rules apply: a 12-day waiting period, one lien at a time, and 12 months of seasoning. The minimum subsequent draw on a Texas line is $4,000. Properties are limited to 10 acres. Every figure is subject to lender guidelines and full file review.
Texas second homes and investment properties are eligible as non-homestead transactions. On an investment property, equity lines through the network top out at 70% CLTV, with a $500,000 maximum line and a 700 minimum credit score. Lendmire’s piece Texas Rental HELOC vs Homestead Equity Rules That Apply walks through that split in more detail.
Once the home becomes a true rental, a DSCR cash-out refinance enters the picture. Most programs in the network cap a cash-out on a standard rental at about 75% LTV. About six months of seasoning is a common expectation. Most programs want a credit score near 660, a 620 floor exists in parts of the network, and 700 or better unlocks the strongest tiers.
Coverage works like this: monthly rent divided by the full monthly obligation, meaning principal, interest, taxes, insurance and any HOA dues. A ratio of 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 does not mean positive cash flow, because repairs, vacancy, management and capital costs sit outside the calculation.
Reserves vary by lender, leverage and loan size, and commonly run around six months of PITIA (principal, interest, taxes, insurance and association dues). For the full picture of how these loans fit together, see the complete DSCR loans guide. For the homestead-to-rental transition specifically, Lendmire’s piece Can a Texas Home Turned Rental Get a DSCR Cash-Out Refinance? covers the mechanics.
Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.
If you are weighing a home equity line against a cash-out refinance 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.
Frequently Asked Questions
How long must I wait before converting an equity loan?
At least one year must pass since the closing of the equity loan being refinanced. A lender can add its own seasoning on top of that, so the legal minimum is a floor rather than a promise that a given lender will proceed.
Can I take any cash out in a conversion?
No. The loan can only pay off valid homestead liens, closing costs and lender-required reserves. If you want any cash back, the refinance needs to be a new equity loan instead.
Does the 80% cap come from the lender?
It comes from Texas law, not lender policy. A conversion carries an 80% combined-debt test measured on the closing date. Separately, a home equity line on a Texas primary residence through the network also caps at 80% CLTV, which is a lender guideline.
Is a rate-and-term refinance of an equity loan automatically non-equity?
No. It becomes non-equity only if every conversion condition is met and the notice is timely. A refinance that misses a step risks being treated as a defective lien.
What if the home is now a rental?
Then the borrowing follows rental-property rules rather than homestead rules. Title work should confirm that no equity lien remains of record. After that, a DSCR cash-out refinance is reviewed on rental coverage, leverage and credit, subject to lender guidelines.
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.
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References
1. Texas Legislative Reference Library, Proposition 2 amendment details
2. Texas Legal Guide, homestead protections
This article is part of Lendmire’s home equity line of credit program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Refinance Rules for Paying Off a Home Equity Loan on a Texas Homestead · Texas Refinance Requirements for a First and Second Mortgage · Can You Lower Your Payment by Refinancing a Texas Home Equity Loan?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.