Home Equity Loan Texas: Using Your Equity for Your Goals, and the Rules to Know

A lot of Texas homeowners ask me about a home equity loan Texas lenders can offer, usually because they have a project or a bill in mind: a kitchen that needs work, debt that keeps growing, a child heading to college. Equity can be a useful tool for those things. It's also borrowing against the place you live, so I want you to see both sides before you decide. Texas writes its home equity rules into the state Constitution, and many of them are there to protect you.

Your equity is the difference between what your home is worth and what you owe on it. If you borrow against it, the lender takes a lien on your home. The Finance Commission of Texas puts the consequence plainly in the notice lenders must give you: if you don't repay the loan or you fail to meet its terms, the lender may foreclose and sell your home.

That's the part I never want glossed over. A home equity loan may cost less than some other borrowing, depending on the loan, but the collateral is your house. Using equity for something that adds to your home's condition, or replaces higher-cost debt with a plan to stop the debt from coming back, is very different from using it for spending that leaves nothing behind.

How much can I borrow against my home in Texas?

For a Section 50(a)(6) home equity loan, the new loan plus all other loans secured by your home can't exceed 80 percent of the home's fair market value on the date the loan is made. Your lender determines what you qualify for within that cap.

How long does a Texas home equity loan take to close?

The Constitution requires at least 12 days after the later of your application or the date the lender provides the required notice. Some timelines run longer, so ask your lender for a realistic schedule.

Are there limits on closing costs for a Texas home equity loan?

Yes. Fees are capped at two percent of the original principal amount, not counting a third-party appraisal, a survey, the state base premium for title insurance with endorsements, and a qualifying title examination report.

Can I get a Texas home equity loan right after another one?

Not usually. A new one generally can't close before the first anniversary of the earlier home equity loan's closing, and only one such loan can be secured by your home at a time. There's a narrow exception for a declared emergency when you request it on oath.

What happens if I can't repay a home equity loan?

The lender may foreclose and sell your home, although in Texas the lien can be foreclosed only with a court order. Texas home equity loans are also without personal liability for you and your spouse, unless the loan was obtained by actual fraud.