Does Texas Restrict Home Equity Loans and HELOCs?

The Quick Read: Yes, Texas restricts both, but only when the collateral is the borrower’s own homestead, because the limits sit in the state constitution and do not touch a rental or other investment property. Rental and second-home lines are treated as non-homestead loans and follow lender guidelines instead.

• A homestead equity loan or line carries a 12-day wait before closing, a one-lien-at-a-time rule, and an 80% combined loan-to-value cap on Lendmire’s wholesale network.
• Rentals and second homes are not covered by those homestead rules.
• On an investment property, the network ceiling is 70% combined loan-to-value, with a 700 minimum credit score, subject to lender guidelines.
• A DSCR loan cannot cash out your own Texas home, because it is built for non-owner-occupied investment property.

Why Texas Treats Home Equity Differently

Texas did not leave home equity borrowing to ordinary lender policy. The Texas A&M Real Estate Research Center explains that the requirements live in the state constitution, at Article XVI, Section 50(a)(6). It groups the covered loans into three types: cash-out refinances, home equity loans, and HELOCs.

That is why the rules feel rigid. A bank cannot waive them to win a deal. A broker cannot negotiate around them.

The history explains the caution. The same research center notes that Texas was the last state to permit home equity loans at all. The Texas Senate Research Center analysis of the later constitutional amendment confirms the law first passed in the late 1990s, and that a 2017 amendment changed how the fee cap is calculated. Texas opened the door slowly, and it wrote consumer protections into the foundation.

So the question has two parts. Does Texas allow these products? Yes. Does it restrict them? Also yes, on the one property type where the constitution applies.

Which Properties Do the Restrictions Cover?

The restrictions attach to the homestead, meaning the borrower’s primary residence. Second homes and investment properties are non-homestead transactions. That distinction drives almost every decision an investor makes here.

Here is how it looks on Lendmire’s wholesale network for a home equity line, subject to lender guidelines and full file review:

A few notes on reading that table. The 80% figure is the Texas overlay on primary residences; the higher primary tiers elsewhere on the network never apply to a Texas homestead. The 90% second-home ceiling exists only at a 720-or-better credit profile. And the investment ceiling of 70% has no tier above it.

Other products in the wider market may advertise different numbers. Those describe the broader market, not what this network arranges.

The Rules That Bind a Homestead Loan

A homestead equity loan or line comes with a short list of firm rules. Each one is a constitutional requirement, not a pricing choice.

The waiting period. The Texas Office of Consumer Credit Commissioner states that the constitution requires a waiting period before a home equity loan can close. The clock does not start at application alone. It starts once the borrower has applied and also received the required consumer notice. Apply on Monday, receive the notice on Wednesday, and the waiting period starts Wednesday. The constitutional text, as reproduced by FindLaw, puts it the same way: no closing before the required period has passed after the application, or after the notice, whichever is later. Timing beyond that minimum varies by file and lender.

One lien at a time. A Texas primary residence can carry only one of these liens at once. Lendmire’s network applies this to primary residences only.

Seasoning. A homestead line also carries a 12-month seasoning requirement. Texas second homes and investment properties do not.

Structure. The 80% combined cap on Texas primary residences works alongside the lien rule. Together they limit how much equity a homeowner can pull in one step.

Draws. For Texas lines, the minimum subsequent draw after closing is $4,000 on programs that state a minimum. That is higher than the $1,000 minimum in most other states.

Compliance is not optional. A lien that does not follow Section 50 can be invalid until the problem is cured. A legal paper on the reshaping of Texas home equity law and remedies discusses this void-until-cured doctrine and argues the risk has arguably limited how much of this lending gets done. That is the reason lenders treat Texas homestead files conservatively.

What the Rules Don’t Touch

Investment property sits outside the homestead framework. A rental in Houston, Dallas, San Antonio, or Austin can carry an equity line under the lender’s own guidelines, not the constitutional checklist.

That does not make it unrestricted. It makes it a different rulebook. On Lendmire’s network, an investment line looks like this, subject to lender guidelines:

• Combined loan-to-value tops out at 70% on an investment property.
• The minimum credit score is 700.
• The maximum line is $500,000.
• The structure is a 5-year interest-only draw followed by a 25-year fully amortizing repayment.
• At least 75% of the line is drawn at closing.
• A borrower is limited to three lines, and an owner of more than 15 financed properties is not eligible.

Title matters too. The borrower must hold title individually or in a revocable living trust. LLCs, corporations, partnerships, and irrevocable, blind, or land trusts cannot hold title. If a rental is already deeded to an LLC, it needs a vesting change first, or a DSCR cash-out becomes the cleaner route.

Property type also filters the field. Single-family, 2-4 unit, PUD, townhome, and condominium properties can work, including non-warrantable condos. Manufactured homes, co-ops, condotels, log homes, commercial and mixed-use properties, and agricultural zoning are not offered. In Texas, the property is limited to 10 acres. A property that is listed for sale, or was listed within the past 60 days, is ineligible in Texas.

The Texas equity restrictions are not the main hurdle for investors. Credit, leverage, title, and property type are.

Where the Decision Flips for Investors

The first question is whose equity you are using. Pulling cash from your own homestead means the 12-day timing, the one-lien rule, and the 80% cap. Pulling cash from a rental follows the lender’s guidelines instead. That is the practical difference.

Picture an investor who owns a primary residence and two rentals, and wants a down payment for a third rental. Using homestead equity makes sense if the home has plenty of room under the 80% cap and the purchase date is flexible. Build the 12-day window into the offer timeline. Equity from a rental line can sidestep that wait, but it must clear the investment tier: 70% combined, a 700 score, and the title rules above.

Now consider an investor who owns several rentals and wants capital for the next purchase. Here a DSCR cash-out refinance is often the cleaner route, and the complete DSCR loans guide walks through how those files work. Across Lendmire’s wholesale network, a cash-out refinance on a standard rental tops out around 75% LTV, with about six months of seasoning a common expectation. DSCR loans qualify primarily on property-level rental income covering the payment, subject to lender guidelines. Coverage of 1.00 is where many select programs start; a separate select-lender path goes below 1.00, with leverage and terms adjusted.

One caution applies to both routes. Clearing 1.00 coverage is not the same as positive cash flow. The ratio compares rent to the full monthly obligation of principal, interest, taxes, insurance, and any HOA dues. Repairs, vacancy, management, utilities, and capital expenses sit outside it.

Honestly, this is a genuine toss-up for investors with ample homestead equity. The homestead line may carry a higher leverage ceiling than the 70% investment tier, but it comes with a waiting period and real compliance friction. The investment line is simpler, though capped lower and limited to $500,000. Run both before choosing.

Edge Cases Worth Knowing

Refinancing an existing equity loan. The 2017 amendments allowed a homestead equity loan to be refinanced into a non-equity loan. That route has its own notice and waiting rules, so a borrower with an existing homestead equity lien should talk to the lender about the refinance path before assuming a clean payoff.

A former homestead. If a property once served as your primary residence and still carries a homestead equity lien, payoff and cure questions become title-counsel questions. The void-until-cured doctrine is the reason. Sort it out before listing the property as a rental.

Business-purpose lending versus homestead lending. 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. That is why a DSCR loan cannot cash out your Texas home.

Key Terms Defined

Homestead: The home you live in as your primary residence, which Texas protects with extra rules.

Section 50(a)(6): The part of the Texas constitution that sets the rules for homestead cash-out refinances, home equity loans, and HELOCs.

Combined loan-to-value (CLTV): Your first mortgage plus the new line, divided by the property’s value.

HELOC: A revolving line of credit secured by a property, drawn in stages rather than as one lump sum.

Non-homestead property: A rental, second home, or other property that is not your primary residence.

Myths About Texas Equity Rules

Myth: Texas bans HELOCs. It does not. The research center lists HELOCs as one of the three loan types the framework covers, and Lendmire arranges Texas lines.

Myth: The 80% cap and 12-day wait apply to every Texas cash-out. They bind primary residences. Texas second homes and investment properties are eligible as non-homestead transactions and follow their own tables.

Myth: A lender can shorten the waiting period. It cannot. The wait is constitutional.

Myth: The clock starts at application. It starts at the later of application or receipt of the notice.

Myth: Texas blocks investors from equity. It does not. The homestead rules do not govern rentals.

Next Step

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 mortgage broker that places these files with select lenders in its wholesale network, and the calculator on this page gives an illustrative estimate to start with. Reach the team at 828-256-2183.

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, What to Know About Home Equity Loans in Texas

2. Texas Senate Research Center, S.J.R. 60 bill analysis

3. Texas Office of Consumer Credit Commissioner, Advisory Bulletins and Disclosures

4. FindLaw, Constitution of the State of Texas, Article 16 Section 50

5. The Reshaping of Texas Home Equity Laws and Remedies