Cash-Out Refinance in Texas | Rules & Waiting Period 2025

Does Texas allow cash-out refinancing?

If you have enough home equity, it’s absolutely possible to get a cash-out refinance in Texas.

Although Texas cash-out refinance rules are a little different than those in other states, they’re no longer as strict as they used to be.

As long as you have decent credit and more than 20% home equity, you should be able to refinance your mortgage and pull cash out from your home. With high equity levels nationwide, many Texans will easily meet these requirements.

Check your Texas cash-out refinance eligibility. Start here

In this article (Skip to...)

Texas rules
Eligibility requirements
Texas cash-out process
How soon can I refinance?
Alternatives
FAQ

How does a Texas cash-out refinance work?

A cash-out refinance in Texas, also called a Texas 50(a)(6) loan or “Texas A6 refinance,” replaces your current mortgage with a larger one. The new loan pays off your existing balance, and the difference comes to you as a lump sum of cash.

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Texas law imposes more restrictive requirements for this process than those in other states. You can borrow up to 80% of your home’s value, which means you must retain at least 20% home equity. The funds may be used for home improvements, debt consolidation, or other financial needs.

Like any cash-out refinance, your monthly mortgage payment will typically increase because the loan amount is higher than your previous mortgage.

Texas cash-out refinance rules and guidelines

Texas 50(a)(6) cash-out rules come directly from the state constitution. Lawmakers eased restrictions in 2018, but some cash-out refinance rules in Texas are not found in other states.

“Any homeowner is eligible for this Texas cash-out refinancing loan. You simply need to have earned more than 20% equity in your home,” says Herb Ziev, a Certified Mortgage Planning Specialist in Texas.

Check your Texas cash-out refinance eligibility. Start here

Key Texas A6 refinance rules include:

Equity requirement: Your new loan cannot exceed 80% of the market value of your home, meaning you must keep at least 20% equity.
Fee cap: Lender fees are limited to 2% of the loan amount. This cap does not include appraisal fees, survey costs, title insurance, attorney fees, or discount points.
Lien limits: All existing liens, including second mortgages or HELOCs, must be paid off at closing. Only one Texas A6 loan may exist on a property at a time.
Primary residence only: Cash-out refinancing applies only to your homestead. Investment properties and second homes are not eligible for a cash-out refinance in Texas.
Waiting periods: You must wait six months after buying a home before the first cash-out refinance, twelve months between cash-out refinances, seven years after a foreclosure, and four years after a bankruptcy or short sale.
Federal loan restrictions: Texas law limits cash-out refinancing to conventional mortgages under Section 50(a)(6). That means homeowners cannot use an FHA cash-out refinance or a VA cash-out refinance in Texas.
Closing requirements: All borrowers and their spouses must attend closing in person at a Texas title company, lender’s office, or attorney’s office. Power of attorney is not allowed.
Property restrictions: Agricultural land is generally ineligible for a Texas cash-out refi, except for working dairy farms. Urban homesteads are limited to 10 acres, while rural homesteads may extend up to 100 acres.

These Texas cash-out refinance rules protect homeowners by limiting fees, preserving the value of their homes, and ensuring transactions occur under strict oversight.

Eligibility: Texas cash-out refinance requirements

While the previous section outlined the constitutional rules that apply to every borrower, this section explains the borrower-level requirements mortgage lenders use to decide who qualifies.

To qualify for a cash-out refinance in Texas, you must meet both state rules and lender guidelines. These Texas cash-out rules focus on credit score, debt-to-income ratio, and the value of your home.

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Debt-to-income ratio

Your debt-to-income ratio (DTI) figure compares your monthly debt payments to your gross monthly income. DTI includes debt like your mortgage, car loans, student loans, and credit card payments.

Lenders usually cap your DTI ratio at 43%. For instance, a borrower earning $5,000 a month with $2,000 in debt payments would have a DTI of 40%.

Minimum credit score

Most lenders require a minimum score of 620, though some set the bar at 660 or higher. These standards are not codified in Texas law; instead, they reflect underwriting guidelines for a conventional loan backed by Fannie Mae or Freddie Mac.

Because each mortgage lender has some discretion, a strong profile in other areas may offset a slightly lower score. For example, a borrower with a 610 credit score, a low DTI of 30%, and a steady employment history might still qualify for a new mortgage loan.

Home equity

Texas cash-out refinance requirements are closely linked to the amount of home equity. Your new loan cannot exceed 80% of the appraised value of your home, which means you must retain at least 20% equity.

If your home is worth $300,000, the maximum loan amount would be $240,000.

Any existing home equity loans or HELOCs must be paid off at closing, which may reduce the amount of cash available. These Texas refinance rules protect homeowners by preserving the value of your home, preventing over-leverage, and avoiding the need for mortgage insurance, which typically applies when equity falls below 20%.

Applying for a cash-out refinance in Texas

While the steps involved can vary from one Texas lender to the next, here’s what you can often expect when applying for a cash-out refinance in Texas.

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1. Check your credit score

The first step when applying for a cash-out refinance in Texas is checking your credit score. There are free and low-cost services available online. If you haven’t done so in the last 12 months, you can also request a free copy from the three major credit reporting agencies.

2. Obtain a home appraisal

Next, your lender will order a home appraisal to confirm your property’s value, which could cost you a few hundred dollars. Don’t forget to let your lender and the home appraiser know about any repairs or improvements you’ve made to the house since you bought it.

3. Lock in your lowest interest rate

Unless rates are moving down, you might prefer to lock in the mortgage rate as soon as possible. This protects you during the Texas cash-out refinance closing process, which could take up to 45 days. Additionally, some lenders may charge a fee for locking in your interest rate.

4. Review and sign Texas’ 12-day disclosure letter

In order to get a cash-out refinance in Texas, homeowners have to sign a letter that explains how the process works. Even though cash-out loans may take less time to finish, the law requires that there be a 12-day wait between the application and the loan closing.

5. Close on the loan

Your Texas cash-out refinance will proceed to the closing stage once all required documentation and verifications have been completed. The closing agent will coordinate the signing of final documents, funds disbursement, and recording of the new mortgage with the county recorder’s office. This procedure can take several days to several weeks.

How soon can you refinance again after a Texas cash-out refinance?

In Texas, there is a specific waiting period before you can replace your cash-out refinance with another refinance transaction. According to Texas law, you must wait at least 12 months from the closing date of your cash-out refinance before you can refinance your mortgage again, whether it’s another cash-out refinance or a rate-and-term refinance.

It’s important to note that even if you are refinancing without taking cash out after completing a cash-out refinance, the transaction will still be considered a cash-out refinance due to the “once a Texas cash-out, always a Texas cash-out” rule. This means that the 80% loan-to-value (LTV) limitation will apply to any future refinancing, regardless of whether you take additional cash out or not.

Check your eligibility for a cash-out refinance in Texas. Start here

Pros and cons: Texas cash-out refinance

When considering a cash-out refinance in the state of Texas, it’s important to weigh both the advantages and drawbacks to determine if this financial decision suits your needs.

Pros:

Tap into your home’s equity for a lump sum of cash for various purposes.
Replace your current mortgage with a new one, potentially at a lower rate or better terms, to reduce your monthly payments.
Use the cash to pay off high-interest debts, consolidating them into one loan with a lower rate.

Cons:

Your home serves as collateral, so missing payments can lead to foreclosure.
Closing costs can be substantial and are typically added to the loan balance.
Requires a new loan application and detailed documentation.
Interest rates may be higher than your current mortgage, depending on market conditions and your credit score.

Texas cash-out refinance alternatives

Not every homeowner in Texas will benefit from a cash-out refinance. Depending on your goals, you may want to explore other ways to access home equity or adjust your mortgage loan. The following alternatives offer different paths to lower your interest rate, consolidate debt, or finance major expenses without relying on a Texas 50(a)(6) cash-out refinance.

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A rate-and-term refinance adjusts the interest rate or loan term of your current mortgage without pulling cash from home equity. It works well for homeowners looking to lower their mortgage rate or shorten their repayment period.
A Streamline Refinance requires less paperwork than a traditional refinance for borrowers who currently have an FHA, USDA, or VA loan. This option may lower your mortgage rate and reduce closing costs.
A home equity line of credit (HELOC) gives you a revolving line of credit based on the value of your home. Unlike a cash-out refinance, which provides a lump sum, a HELOC offers flexibility for ongoing expenses or projects with uncertain costs.
A home equity loan provides a fixed lump sum while leaving your existing mortgage loan in place. It typically comes with a fixed interest rate and a predictable repayment schedule, making it a useful option for large expenses, such as renovations or debt consolidation.

FAQs about cash-out refinancing in Texas

Check your Texas cash-out refinance eligibility. Start here

Yes, homeowners in the state of Texas who have built enough home equity can get a cash-out refinance loan. The Texas constitution has eased its regulations on this type of loan, making them even easier to use.

A Texas 50(a)(6) loan is essentially a Texas cash-out refinance option, governed by Section 50 of Article XVI of the Texas Constitution. Often, lenders will refer to Texas cash-out refinances as A6 loans, highlighting their unique status in the state’s real estate and mortgage regulations.

No, you cannot do an FHA cash-out refinance in Texas. Texas laws prohibit cash-out refinances of government-backed loans, including those insured by the FHA. This restriction is part of Texas’s unique regulations under Section 50(a)(6) of the Texas Constitution.

No, you cannot do a VA cash-out refinance in Texas. Texas regulations do not permit cash-out refinances on VA loans, in accordance with the state’s specific laws governing home equity lending.

The amount you can borrow through a cash-out refinance in Texas is capped at your county’s conforming loan limits, and you’re limited to borrowing up to 80% of your home’s value. This is known as the loan-to-value ratio (LTV). For example, on a $500,000 home, you might be eligible for a $400,000 loan under a Texas cash-out refinance. If your existing mortgage balance is $300,000, you could potentially receive $100,000 in cash.

You’ll need more than 20% equity in your home to benefit from a cash-out refinance loan in Texas. That’s because you’ll have to leave at least 20% of your home’s equity untouched, similar to the down payment requirement for a conventional mortgage. For instance, on a home valued at $400,000, a Texas cash-out refinance would allow you to borrow up to $320,000 (80% of the home value), with the remaining 20% ($80,000) preserved. The amount of cash you can receive depends on your existing mortgage balance.

The Texas Constitution does not limit the number of cash-out refinance loans you can get on one home. But it does require you to wait at least a year between cash-out refinancing. In practice, you couldn’t likely get Texas cash-out refinance loans every year anyway. You’d need to wait long enough for your equity to build back up before you could benefit from a second cash-out refinance. That could take years, unless property values in your area are rising dramatically.

In Texas, you cannot have both a HELOC and a cash-out refinance on the same property at the same time due to the state’s specific home equity laws. Texas limits the amount of equity you can access from your home under a cash-out refinance to 80% of the home’s value, and it has strict rules regarding second liens. If you want to get a HELOC after a cash-out refinance in Texas, you typically need to wait until the refinance transaction has been completed and the home equity loan has been in place for a while (usually 12 months). After this waiting period, you may be able to apply for a HELOC.

Check your Texas cash-out refinance eligibility

Not everyone will qualify for a cash-out refinance in Texas, but for those who do, it can be a great program.

Check your eligibility with Texas-approved lenders, and be sure to shop around with at least three or four lenders to make sure you’re getting a good rate. Always verify that your lender is licensed through the Nationwide Multistate Licensing System (NMLS) before proceeding with your application.

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