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Seeing a lot of posts lately from Texas homeowners weighing a cash out refinance in Texas, so figured I'd share what actually tripped people up, since the state does this differently than everywhere else.
First, the 80% cap is real and non-negotiable. It's written into the Texas Constitution (Section 50(a)(6), the "A6" loan), so no lender can go above it. If you're used to hearing about 85–90% cash-out in other states, Texas caps you at 80% of appraised value, full stop.
Second — and this is the one I think people underestimate — a cash-out refinance re-prices your entire mortgage, not just the cash you take. So if you locked a low rate years ago, pulling $40k could mean a higher rate on the whole balance. That math is why a lot of folks end up comparing it against a home equity loan or second lien, which only charges the higher rate on the smaller amount. Worth running both before deciding.
Third, the "once an A6, always an A6" thing. Once you do a Texas cash-out, that designation follows the homestead in county records. You can refinance out of it later into a non-home-equity loan, but only after 12 months and only if you don't take additional cash. Good to know going in.
Also don't forget the mandatory 12-day cooling-off period and the one-per-12-months limit. And the 2% lender fee cap doesn't include third-party costs like appraisal and title, so closing costs still add up.
Anyone here actually done one recently? Curious whether the rate bump was worth it for you versus just taking a HELOC or home equity loan, and how long your close took start to finish.
First, the 80% cap is real and non-negotiable. It's written into the Texas Constitution (Section 50(a)(6), the "A6" loan), so no lender can go above it. If you're used to hearing about 85–90% cash-out in other states, Texas caps you at 80% of appraised value, full stop.
Second — and this is the one I think people underestimate — a cash-out refinance re-prices your entire mortgage, not just the cash you take. So if you locked a low rate years ago, pulling $40k could mean a higher rate on the whole balance. That math is why a lot of folks end up comparing it against a home equity loan or second lien, which only charges the higher rate on the smaller amount. Worth running both before deciding.
Third, the "once an A6, always an A6" thing. Once you do a Texas cash-out, that designation follows the homestead in county records. You can refinance out of it later into a non-home-equity loan, but only after 12 months and only if you don't take additional cash. Good to know going in.
Also don't forget the mandatory 12-day cooling-off period and the one-per-12-months limit. And the 2% lender fee cap doesn't include third-party costs like appraisal and title, so closing costs still add up.
Anyone here actually done one recently? Curious whether the rate bump was worth it for you versus just taking a HELOC or home equity loan, and how long your close took start to finish.
