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How much money can you get with a cash-out refinance in Texas?

April 15, 2022 | By Mendy Rimler
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Need cash fast? If you own a home in Texas, you may be sitting on a golden egg!

Cash-out refinancing is a type of loan that allows you to borrow against the equity in your home, and it can be a great way to get money for renovations, debt consolidation, or other expenses. 

Our team of experienced lenders has processed thousands of cash-out refinance loans. That’s how we can share all that knowledge with you!

After reading this article you will know:

Does Texas allow cash-out refinance?

Yes, Texas does allow cash-out refinance loans. In fact, this type of loan is one of the most popular in the state! 

Home prices skyrocketed in Texas in 2021, meaning that a lot of folks have more equity in their homes than ever before. 

What is a cash-out refinance loan?

A cash-out refinance loan is a mortgage that allows you to borrow against the equity in your home. This can be a great way to get money for renovations, debt consolidation, or other expenses. 

The amount of money that you can borrow will depend on your home's value and your credit score. Your new loan will have different terms than your previous loan, so your new payments will change, as well. 

The Texas cash-out refinance loan explained

In Texas, the rules for cash-out refinances are different than they are in other states. For example, you can only borrow up to 80% of your home's value. 

This means that if your home is worth $100,000, you can only borrow up to $80,000. Additionally, you must have at least 20% equity in your home to be eligible for a cash-out refinance.

Are cash-out refinancing rules different in Texas?

Yes, the rules are different in Texas. As we mentioned above, you can only borrow up to 80% of your home's value and you must have at least 20% equity to qualify. Additionally, there are other requirements like credit score and income that may come into play.

Additionally, Texas has specific maximum limits for fees associated with these loans. Now the max fees are 2 percent, whereas they used to be 3 percent of the original loan amount.

We’ll dive into some further specifics as they apply to Texas in later sections - keep reading!

How much cash out can I get on a refinance in Texas?

The amount of cash you can get will depend on several factors including your home's value, your credit score, and your income. However, in general, you could potentially borrow up to 80% of your home's value if you have at least 20% equity.

There is no specific dollar amount limit to how much cash you can get from a cash-out refinance. 

How much would I get for a cash-out refinance?

How much you actually get depends on several factors including the value of your home and what you owe. Let’s run a scenario to help you better understand:

Let’s say your home is worth $500,000. To meet the threshold of 20% equity, you can only owe $400,000 on the home. However, if you owe that much, you don’t have any wiggle room to withdraw cash. 

But if your home is worth $500,000 and you only owe $300,000, you’d be able to withdraw up to 80% of the home value. When you subtract what you owe from that amount, you’d be able to walk away with $100,000 in cash. 

However, keep in mind that you may also pay up to $10,000 in fees for a loan, so your net cash would be more like $90,000. 

Benefits of cash-out refinance loan

There are several benefits to taking out a cash-out refinance loan. First, it can help you consolidate debt or pay for renovations or other expenses. 

Additionally, it can lower your monthly payments and interest rate, and it can provide you with extra cash in hand. The cash from a cash-out refinance has no strings attached, so some people use it as a low-interest loan when they need cash. 

How soon can I replace my Texas cash-out refi?

In general, you can replace your cash-out refinance loan within six months. However, there are some restrictions and requirements that you'll need to meet to qualify.

In Texas, you are legally allowed to get a cash-out only once per year. However, Texas cash-out rules only apply to your primary residence. That means if you have an investment or second home, they are not bound by these rules.  

Other Texas cash-out refi guidelines

In addition to the rules we've already mentioned, there are other guidelines that you'll need to follow to get a cash-out refinance loan in Texas. 

For example, you must have a steady income. Your debt to income ratio must be 45% or lower. Additionally, your home must be appraised by a licensed appraiser.

FHA, VA, and USDA loans are not permitted under Section 50(a)(6) rules. Your current mortgage may not have mortgage insurance.

Additionally, you must be at least 4 years removed from filing for bankruptcy or selling a home in a short sale, and 7 years past any previous foreclosures. 

Credit score required for a Texas cash-out refinance

To get a cash-out refinance loan in Texas, you'll need to have a credit score of at least 620. This is the minimum credit score required by most lenders.

What is a home equity loan?

A home equity loan is similar to a cash-out refinance loan in that it allows you to borrow against the equity in your home. However, there are some key differences between these two loans. 

Cash-out refinance loans replace your current mortgage with a new one. You will have a new interest rate, amount, and term. That’s often part of the appeal! Many homeowners refinanced in the past few years to take advantage of historically low-interest rates. 

However, a home equity loan is a second, separate loan. This is sometimes known as a second mortgage. 

Home equity loans have shorter terms and higher interest rates. You can only borrow up to 80% of your home's value with a home equity loan. In Texas, this isn’t a big difference, but in other states, you can sometimes take out up to 100% with a cash-out refinance.

Home equity loans vs cash-out loans

When deciding between a home equity loan and a cash-out refinance loan, there are several things to consider. First, how much money do you need to borrow? Home equity loans typically have smaller loan amounts than cash-out refinance loans. 

Additionally, home equity loans have shorter terms and higher interest rates. They are often a good option if you don't have enough equity for a cash-out refinance. The minimum loan amount is set by the lender, usually $5,000.

Which loan is right for you?

The type of loan that's right for you will depend on your individual circumstances. If you need a large amount of money and have at least 20% equity in your home, a cash-out refinance may be the best option. 

On the other hand, if you need a smaller amount of money and have good credit, a home equity loan may be the better choice. Ultimately, it's important to compare your options and choose the loan that's best for you.

Check your Texas cash-out refinance eligibility

If you're interested in getting a cash-out refinance loan in Texas, the first step is to check your eligibility. You can go online to get an idea of current estimates for your home, then check it against your latest mortgage statement.

You can also lookup your credit score to see if you’d meet the requirements for a cash-out refi. 

How a mortgage lender works

One of the first steps to your refinance journey is to find a good mortgage lender. A mortgage lender is a company that will lend you the money to finance your home. 

When you're comparing mortgage lenders, there are a few things you should look at. First, what is the interest rate? The interest rate is the amount of money that you'll be paying back in addition to the amount you borrow. It's important to find a lender with a competitive interest rate. 

Additionally, you should look at the fees associated with the loan. Some lenders charge origination fees, processing fees, or other miscellaneous charges. It's important to find a lender that has low fees so that you don't end up paying more than you have to.

Why it matters

It matters a lot who you choose as your mortgage lender! A good mortgage lender will offer you a competitive interest rate, low fees, and excellent customer service. 

A bad mortgage lender will do the exact opposite. That's why it's so important to take your time and choose the right one. Unfortunately, whenever housing markets heat up, you need to be wary of predatory lending practices. 

The experienced team at Texas United Mortgage is well-versed in different loan types, and we work hard to find the best solution for YOU. Not just any opportunity to make a buck!

How to choose a mortgage lender

Now that you know what to look for in a mortgage lender, it's time to start shopping around. You can use our Mortgage Lender Directory to find lenders in your area. It can also be helpful to ask friends or relatives for referrals. 

Once you've found a few that you're interested in, give them a call and ask questions about their loan products and terms. After you've spoken with a few lenders, it's time to compare their offers and choose the one that's best for you.

Getting started with a cash-out refi

When you're ready to apply for a cash-out refinance in Texas, the first step is to gather your financial documents. You'll need things like your tax returns, pay stubs, bank statements, and more. Once you have all of your documents together, you can begin the application process.

The application process for a cash out refinance is similar to that of a regular mortgage loan. You'll fill out an application and provide some basic information about yourself and your finances. 

Then, the lender will pull your credit report and assess your financial situation. If you're approved for the loan, you'll then need to provide all the documentation you collected. 

The lender will provide you with a loan estimate worksheet. This document will outline the terms of your loan, including the interest rate, monthly payment, and closing costs. 

Finally, once you've reviewed the loan estimate, you can decide whether or not to move forward with the loan. If you decide to proceed, you'll then need to sign some paperwork and provide the lender with additional information.

Recap of how much cash you can get with a cash out refi in Texas

In Texas, you can borrow up to 80% of your home's value, minus whatever you still owe. There is no maximum dollar amount you can get from a cash-out refi. 

If you're considering a cash-out refinance in Texas, be sure to shop around for the best interest rates and terms. Our team would be thrilled to start working with you to get approved for a cash-out refinance today!

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