The Quick Read: The ceiling is set by the Texas Constitution, not by the lender. The new loan plus every other lien on the home cannot exceed 80% of the home’s appraised value. Subtract what you still owe, and what remains is the most cash you can take before costs. The appraisal controls the number, and financed closing costs reduce what you actually receive.
The One-Line Formula
Here is the whole method in a single line: 80% of appraised value, minus all liens that stay or get paid off, minus financed closing costs, equals cash to you.
Three details make that line work in practice:
- The 80% is a combined cap. It counts the new first mortgage plus any other lien secured by the home.
- The value is the appraised value, agreed in writing by you and the lender. It is not your purchase price or your own estimate.
- The ceiling applies even if a loan program would otherwise allow more.
The wholesale programs we place files with generally cap a conventional cash-out on a one-unit principal residence at 80% LTV. In Texas, the constitutional 80% lines up with that figure. A faster-looking lane exists elsewhere in the network for higher leverage on some primary residences, but it is not written on Texas homesteads. All program figures are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
Why Texas Works Differently
Most states leave the maximum cash-out to the investor. Texas writes it into the constitution. A loan that takes cash out of a homestead is called a Section 50(a)(6) loan, often shortened to “A6” or “Texas equity loan.”
The state’s published notice to borrowers lays out the core rules. According to the Texas Office of Consumer Credit Commissioner’s notice, which tracks the constitutional text, the loan:
- may not push the total of all liens above 80% of fair market value,
- may not close before the 12th day after you apply or receive the notice,
- may not be secured by additional collateral,
- must be the only such loan on the home at one time,
- requires consent from every owner and every owner’s spouse,
- may be prepaid without penalty, and
- must have payments that at least cover accrued interest.
For the constitutional wording itself, a Justia reproduction of Article XVI, Section 50 is a secondary copy, so treat it as a guide and let your lender confirm the details against the primary sources.
The lender decides whether Texas treats your refinance as an A6 loan. Both Fannie Mae and Freddie Mac put that determination on the lender, regardless of how the usual “cash-out” and “limited cash-out” labels would apply. Fannie Mae is explicit that every loan that is an A6 loan under Texas law must meet the Texas provisions either way.
How the Loan Is Underwritten, Step by Step
This is the sequence a Texas cash-out follows. Knowing the order helps you plan.
1. Classification. The lender decides whether the transaction is an A6 loan. A rate-and-term refinance that takes no cash out, and does not pay off an existing A6 loan, is generally not one.
2. Notice and waiting period. The state notice goes to every owner and spouse. The earliest closing date is counted from the later of your application date or notice receipt.
3. Appraisal and agreed value. The appraisal sets the fair market value that the 80% is measured against. You and the lender sign a written acknowledgment of that value.
4. Sizing. The lender applies the formula above to find the maximum loan.
5. Underwriting. Standard credit, income and ability-to-repay review applies. The wholesale conventional programs start at a 620 decision score, and the automated finding governs most files, with a total ratio ceiling of 50%. Manually underwritten loans run at 36% or 45% depending on reserves and score factors.
6. Closing. Every owner and spouse signs, and the security instrument carries the equity-loan disclosure. Closing location rules apply, so your lender and title company will tell you where.
7. Right to cancel, then funding. On a refinance of your home, federal rules give you three business days to cancel. The CFPB says that right can be waived only for a bona fide personal financial emergency. Funds are generally not disbursed until the window runs.
Note that the 12-day wait and the three-day cancellation window are separate. One runs before closing, the other after. If you have a fixed date for a renovation draw or a debt payoff, build both into your calendar.
Refinancing a prior A6 loan is a special case. Fannie Mae’s guidance says you must requalify even if your current servicer is the lender.
A Sizing Worksheet You Can Fill In
Work through these lines in order. The numbers below are round and hypothetical, and they are shown without payments.
| Line | What goes here | Hypothetical |
|---|---|---|
| A | Appraised value | $400,000 |
| B | Combined cap (A × 80%) | $320,000 |
| C | Payoff of existing first mortgage | $250,000 |
| D | Other liens that stay or must be paid | $0 |
| E | Gross room (B − C − D) | $70,000 |
| F | Closing costs you finance in | Subtract from E |
| G | Cash to you (E − F) | The rest |
The payoff on line C is not your statement balance. It includes accrued interest through the payoff date, and sometimes an escrow shortfall. Ask your servicer for a written payoff quote and use that figure.
What Changes When You Have a Second Lien
Any other lien secured by the home counts against the 80%. That can include a home equity loan, a HELOC, or an improvement or solar lien that was recorded against the property. A borrower with a first mortgage plus a second lien has less room than the first mortgage alone suggests.
Take the same $400,000 hypothetical value with a $250,000 first mortgage. Add a second lien of $30,000. If that lien stays in place, line D becomes $30,000 and the gross room falls from $70,000 to $40,000. If the new loan pays the second lien off, the cap still has to cover it, because the payoff comes out of the same 80% ceiling.
Only one A6 loan may sit on the home at a time. A borrower with an existing Texas home equity loan therefore usually pays it off as part of the new transaction.
Appraisal Risk: Where the Number Moves
The appraisal is the most movable input. Every dollar of value shifts the ceiling by 80 cents, while your payoff does not move at all. That means a modest miss on value can erase a large share of your cash.
Using the same hypothetical $250,000 payoff:
| Appraised value | 80% ceiling | Gross room |
|---|---|---|
| $400,000 | $320,000 | $70,000 |
| $380,000 | $304,000 | $54,000 |
| $360,000 | $288,000 | $38,000 |
| $340,000 | $272,000 | $22,000 |
A 5% drop in value cuts gross room by roughly 23%. A 15% drop cuts it by more than two-thirds. The leverage works against you on the way down.
If your plan needs a specific amount of cash, size with a cushion. Run the worksheet at a value 5% to 10% below your expectation and see whether the project still works.
Reverse Sizing: Start From the Cash You Need
Sometimes the question is not “how much can I take?” but “can I get this much?” Flip the formula:
Required value = (payoff + other liens + cash needed + financed costs) ÷ 0.80.
Add up everything the new loan has to cover, then divide by 0.80. If the appraised value does not reach that figure, the amount is out of reach under the Texas cap, however strong your credit is. In that case your options are to take less or wait for equity to build.
Financed Costs and the Circle Problem
Closing costs you roll into the loan sit inside the 80% ceiling. That creates a small circle: the more you finance, the less cash you keep. Texas also puts a state cap on certain lender fees, though that cap does not cover every cost on the settlement statement. Your Loan Estimate and Closing Disclosure will itemize what falls where.
Paying costs out of pocket instead of financing them keeps more of the ceiling for cash to you. Financing them keeps your cash in hand today. Neither is right for everyone, and which is better depends on how tight the ceiling is for your file.
The Legal Ceiling Is Not a Recommendation
The 80% cap is a maximum. It does not tell you how much you should borrow. Before you size to the limit, check three things:
- Ability to repay. Your income and debts must support the new loan within the program’s ratio limits.
- Your current loan. The new loan replaces your existing first mortgage, so its rate and term reset. Compare it honestly against what you have now. If your current first mortgage has a strong rate, a smaller second-lien product may serve you better than refinancing the whole balance.
- Mortgage insurance. At 80% LTV on a conventional cash-out, mortgage insurance does not normally apply, since insurance is required above 80%. A file that lands above that line would change the picture.
Where the General Rule Breaks
“Once an A6, always an A6.” Paying off an existing Texas equity loan generally keeps the new loan under the A6 rules, even if you take no cash. Freddie Mac confirms there is an exit: a Section 50(a)(4) mortgage that pays off an A6 loan and meets the Texas requirements can be sold as a no-cash-out refinance. The specific conditions are technical, so ask your loan officer to confirm them before you count on this path.
Rate-and-term refinances. These are generally not A6 loans, and the usual rate-and-term leverage limits apply. That is why a homeowner who only wants a different rate or term is in a very different position from one who wants cash.
Second homes and investment property. These are not homesteads and sit outside the A6 rules. Occupancy decides the leverage, and the standard conventional cash-out limits apply to them instead.
Special-purpose cash-out loans. Freddie Mac does not allow these as A6 loans.
Acreage. The homestead may not exceed the acreage limit set by Texas law, and agricultural homestead restrictions appear in the notice. Check your property against the limit before you apply.
Trusts and co-owners. Every owner and spouse must consent, which affects scheduling. Trust-owned homes raise extra questions, so raise them with your lender early.
Government-insured programs. The FHA Streamline and VA IRRRL are rate-and-term products for existing government loans. They do not return cash, so they sit outside the sizing question. Whether a full FHA or VA cash-out is available on a Texas homestead depends on each program’s current handbook rules, so confirm eligibility with your lender before planning around either one.
Putting It Together
Cash-out sizing for most borrowers goes in this order. First, get a written payoff quote. Second, estimate value conservatively and run the worksheet at that value and at a lower one. Third, count every lien. Fourth, decide whether you will pay costs in cash or finance them. Fifth, stress the ability-to-repay side, not just the equity side.
Our cash-out refinance programs page lays out how the conventional lanes work across the states where Lendmire arranges consumer loans. Texas is one of them, and the constitutional cap is the rule that governs the result here.
If the numbers leave you with little cash, you have not necessarily done anything wrong. Equity room is set by value and balance, and a borrower with a large existing balance may have little or none available.
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
Homestead: the home you live in as your principal residence, which Texas law protects in special ways.
A6 loan (Section 50(a)(6)): a Texas loan that takes cash out of a homestead and follows the constitution’s special rules.
Combined loan-to-value: all liens on the home added together and divided by its appraised value.
Payoff quote: the exact amount needed to retire a loan on a given date, including accrued interest.
Fair market value acknowledgment: a written statement in which you and the lender agree on the home’s value on the loan date.
Rescission: your three-business-day right to cancel certain refinances after signing.
Frequently Asked Questions
What is the most cash I can take out on a Texas homestead?
Eighty percent of the appraised value, minus every lien that stays or gets paid off, minus any closing costs you finance. The 80% is a state constitutional limit, so no program or credit score raises it. A borrower with a large existing balance may find little or no room.
Does the 80% apply to just the new loan?
No. It is a combined cap that counts the new loan and every other lien secured by the home. A second lien, whether a home equity loan, HELOC or recorded improvement lien, reduces the room left for cash.
Is every Texas refinance a cash-out loan under these rules?
No. A rate-and-term refinance that takes no cash out, and does not pay off an existing A6 loan, is generally not an A6 loan. The lender makes that classification, and Fannie Mae and Freddie Mac both place it on the lender.
How do the 12-day wait and the three-day right to cancel fit together?
They are separate. The 12-day wait runs before you can close, and the three-business-day right to cancel runs after you sign. Funds are generally not disbursed until the cancellation window has passed, so plan around both if you have a fixed deadline.
Can I use a cash-out on my Texas home to buy a rental?
Use of proceeds is generally unrestricted on the homestead loan. The rental itself is a separate matter, because occupancy decides the leverage, and non-owner-occupied properties follow different limits from the homestead.
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.
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.
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References
1. Texas Constitution, Art. XVI §50 (Justia reproduction)
2. Fannie Mae Selling Guide B5-4.1-02, Texas Section 50(a)(6) Loan Eligibility
3. Freddie Mac Guide §4301.7, Texas Equity Section 50(a)(6) Mortgages
4. CFPB, Can I ever waive my right to rescind on my mortgage loan?
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: Is a Divorce Buyout on a Texas Homestead a Cash-Out Refinance? · How to Compare Cash-Out Refinance Quotes on a Texas Homestead · How Much More a Cash-Out Refinance Costs on a Texas Homestead
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.