A Texas cash out refinance 50a6, also called a Texas A6 loan or Section 50(a)(6) loan, lets you borrow against your home’s equity by replacing your existing mortgage with a larger loan. You receive the difference between the two loans as a lump sum payment.
Keep reading to learn everything you should know about the key rules, requirements, and right timing for a Texas cash out refinance.
Here’s how a Texas cash out loan works:
🠊 You refinance your primary residence to tap its equity.
🠊 Your remaining home equity decreases by the amount you’re pulling out.You finally open your home’s piggy bank, and you can do anything you want with the coins.
For example, a homeowner has a property valued at $450,000 and a $300,000 mortgage balance.
They refinance 80% of the home’s value ($360,000) and receive $60,000 in cash (the difference between the new and old loans). The remaining equity is $90,000.
Pro Tip: Choose trustworthy lenders familiar with Texas-specific cashout refinancing rules to ensure full compliance and lock in the most competitive interest rate with favorable loan terms.
The following qualify as Texas Section 50a6 loans:
The Texas Constitution protects homeowners with strict rules and regulations, ensuring they stay financially secure and safeguard their home equity for the long term.
According to Article XVI, Section 50(a)(6) of the Texas Constitution, the sum of your new cash out loan and any current mortgage liens may not exceed 80% of your primary home’s value.
This rule preserves a minimum of 20% equity in your property to ensure you don’t acquire too much debt and lose your home.
Previously, the max closing costs were 3% of the loan amount before the Texas Constitution was amended in 2017.
Today, the max closing fees (lender-charged) are 2%, including origination, underwriting, and credit report fees.
This rule protects borrowers from excessive upfront costs, making refinancing more accessible.
However, the cap doesn’t apply to third-party closing costs, such as attorney fees, appraisal and survey costs, and title insurance premiums.
Unlike most other U.S. states, Texas doesn’t allow homeowners to have a second-lien home equity loan if they have another Section 50(a)(6) loan.
The single-lien rule helps prevent over-leveraging, ensuring homeowners can’t take out multiple equity loans or lines of credit that could increase the risk of foreclosure.
This restriction applies to cash out refinances, home equity lines of credit (HELOCs), and closed-end home equity loans.
Clear current liens before refinancing:
You may not use any government-backed mortgage (USDA and VA loans) as a Section 50(a)(6) refinance, as federal guidelines don’t allow cash out advances and lien subordination.
The Texas 50(a)(6) rules apply only to your primary residence.
Texas law prohibits cash out refinancing for secondary homes and investment properties. Also, properties with 2 to 4 units don’t qualify.
Agricultural homesteads, whether a small family farm or a bigger ranch you occupy as your primary residence, now qualify for a cash out refinance.
For example, a Texas rancher with a 160-acre family homestead valued at $625,000 and a $450,000 mortgage balance decided to refinance 80% of the property’s appraised value, $500,000 in total.
After replacing the old loan, they pulled out $50,000 in cash for equipment upgrades and repairs while having a remaining $125,000 equity after closing.
Keep in mind these waiting periods when planning your cash out loan:
Be sure you meet these requirements before planning a cash out refinance:
✅ 620 minimum credit score - The higher your credit score, the better the rates and terms.
✅ Up to 45% debt-to-income (DTI) ratio - Calculate your DTI by dividing your monthly debt payments by your monthly income and multiplying by 100. For example: ($2,000/$6,000) x 100 = 33% DTI
✅ 20% minimum equity after refinancing - You’ll likely secure better rates with a 75% LTV or lower.
✅ Owner-occupied single-unit principal residence - You must live in your home and not use it as an income-earning property.
Pro Tip: Check your credit report for inaccuracies and dispute any errors before applying for refinancing. Settle large debts, reduce high credit card balances, avoid missed or late payments, and limit new credit inquiries to strengthen your credit score.
With thorough planning and proper guidance, you can convert built-up equity into easily accessible funding for your financial goals.
Take time to review the Texas cash out refinance 50a6 rules above for a seamless process.
Our experienced loan officers at Texas United Mortgage will help you understand your refinancing options and answer all your questions every step of the way.
Contact us today to get personalized guidance from application to closing!