What Makes a Texas Home Equity Loan Different From a Regular HELOC?

Texas doesn’t let a lender set its own rules on a home equity loan the way most states do. The Texas Constitution, specifically Article XVI, Section 50(a)(6), lays out an 80 percent loan-to-value cap, a mandatory 12-day wait before closing, an in-person closing requirement, and a limit of one home equity loan or HELOC per homestead at a time. Every one of those applies whether you’re calling it a home equity loan, a HELOC, or a cash-out refinance, because Texas treats them as the same category under the law.

One Set of Rules, Three Different Names

This confuses a lot of buyers moving to Houston from a state without this kind of protection. A friend in another state might describe their HELOC as a flexible, draw-as-you-go line of credit with none of this structure attached to it. In Texas, a HELOC secured by your homestead carries the same constitutional limits as a traditional lump-sum home equity loan. The product still works differently day to day, a HELOC lets you draw as needed during a draw period of roughly five to ten years, while a home equity loan pays out a lump sum with a fixed rate and payment, but the guardrails around both come from the same section of the constitution.

The Move Live Love TX Team™ is a husband-and-wife real estate team serving Houston and the surrounding areas, helping people make the move that comes next.

The 80 Percent Ceiling

Texas caps combined home-secured debt at 80 percent of the home’s value. On a $500,000 home, that means your mortgage balance plus any new home equity loan or HELOC generally can’t exceed $400,000 combined. A homeowner with $250,000 left on their mortgage has room for up to $150,000 in new home equity debt under that ceiling, not a dollar more, regardless of how much equity they’ve built beyond that line.

Why the 12-Day Wait Exists, and What It Requires

A mandatory 12-day period has to pass between application and closing, giving a homeowner time to think it over before signing away a lien on their house. After closing, Texas adds a separate three-day right to cancel, a second cooling-off window on top of the first. Closing itself has to happen in person, at a lender’s office, a title company, or an attorney’s office. There’s no remote-closing shortcut for this particular loan type, even in a market where digital closings have become routine for a purchase mortgage.

Here’s the shape of the protections at a glance:

• 80 percent combined loan-to-value cap on the homestead
• 12-day mandatory waiting period before closing
• Three-day right to cancel after closing
• In-person closing only
• One home equity loan or HELOC per homestead at a time
• Repayment in substantially equal installments, no more than every 14 days

One at a Time, and Why That Trips People Up

Texas allows exactly one closed-end home equity loan or HELOC against a homestead at once. If you already have a HELOC open and later want a lump-sum home equity loan instead, the existing HELOC generally has to be paid off or rolled into the new loan first, not stacked on top of it. This catches homeowners who’ve had a HELOC sitting untouched for years and assume they can add a separate loan for a specific project without closing it first. In Texas, that’s not how it works.

The Move Live Love TX Team is a husband-and-wife real estate team serving Houston and the surrounding areas, helping people make the move that comes next.

What This Means If You’re Buying or Refinancing in Houston

If you’re weighing a cash-out refinance against a HELOC on a home you already own here, these same constitutional rules apply to both, which is worth knowing before you compare quotes from a lender who may be used to a different state’s rules. Our breakdown of Texas homestead exemption savings covers the other major protection built into owning a homestead here, separate from this one but often confused with it in casual conversation.

The Move Live Love TX Team is a husband-and-wife real estate team serving Houston and the surrounding areas, helping people make the move that comes next.

Peter Royster’s background in mortgage lending means this is a conversation we have often with buyers moving to Texas from somewhere else, usually the week they’re surprised their out-of-state lender can’t do here what it did for them back home. The rule isn’t a lender being difficult. It’s the state constitution, and it applies the same way no matter who’s writing the loan.