Home Equity in Texas: HELOC, Home Equity Loan, or Neither?
The median Texas home sold for $335,000 as of April 2026, according to the Texas Real Estate Research Center’s Texas Housing Insight released in June 2026. For owners who bought five or more years ago, that number usually means six figures of equity sitting in the house. The question I hear from Houston to San Antonio is the same: what is the smartest way to get at it? Texas gives you three main tools (a HELOC, a home equity loan, and a cash-out first mortgage), plus a fourth option people forget, which is leaving the equity alone. This post is a decision framework for picking among them.
Quick disclosure before the framework: I am a mortgage broker licensed across Texas (NMLS# 1919613), and I originate first-lien loans, including cash-out. I do not originate HELOCs or standalone home equity loans. I will still explain them straight, because for some owners they are the right call, and you should hear that from someone who cannot sell you one.
Key points:
- Texas caps ALL borrowing against your homestead at 80% of its value, combined across every lien. No product gets around it.
- On a $335,000 home with a $200,000 balance, that cap leaves about $68,000 of borrowable equity, whichever tool you pick.
- A HELOC or home equity loan leaves your existing first mortgage untouched. A cash-out replaces it entirely at today’s rates.
- Texas equity loans carry extra rules: a 12-day waiting period, a 2% cap on certain lender fees, and only one equity loan per 12-month period.
- The single biggest input in this decision is the rate on your current first mortgage compared with the roughly 6.49% market average (Freddie Mac PMMS, week ending July 9, 2026).
- Sometimes the numbers say do nothing. Borrowing against a homestead to fund something optional deserves a hard look.
How much home equity can you actually borrow in Texas?
Texas law caps total borrowing against your homestead at 80% of the home’s fair market value, counting every lien on the property together. Take a $335,000 home with a $200,000 first mortgage: 80% of value is $268,000, minus the $200,000 you owe, leaves a maximum of about $68,000 you could borrow through any equity product, subject to credit, income, and property qualifications.
That 80% wall comes from Section 50(a)(6) of the Texas Constitution, and it applies whether you choose a HELOC, a lump-sum home equity loan, or a cash-out first mortgage on your homestead. I wrote a full breakdown of those rules in my post on Texas 50(a)(6) home equity rules. The short version: expect a 12-day waiting period between application and closing, a closing that must happen at a title company, attorney’s office, or lender’s office, a 2% cap on certain lender fees, and a limit of one equity loan per 12-month period.
The four options side by side
| Option | How the money arrives | Rate type | Your current first mortgage |
|---|---|---|---|
| HELOC | Revolving line, draw as needed | Usually variable | Stays in place |
| Home equity loan | One lump sum | Usually fixed | Stays in place |
| Cash-out first mortgage | One lump sum at closing | Fixed or adjustable | Replaced by the new loan |
| Neither | No new debt | n/a | Stays in place |
All three borrowing options sit under the same 80% cap. The real differences are the rate you pay, whether your existing first mortgage survives, and how the money shows up.
The decision framework: three questions
Question 1: what is the rate on your current first mortgage? This is the fork in the road. If you locked 3.25% in 2021 on your Dallas house, replacing that loan with a cash-out near the 6.49% market average (Freddie Mac PMMS, week ending July 9, 2026) means repricing your entire balance upward to reach the equity. A second-lien product protects that low rate. If your current rate is already close to or above today’s market, the penalty for replacing it shrinks toward zero, and the cash-out math starts winning.
Question 2: do you need a lump sum or a faucet? A roof replacement, a business buy-in, or a land purchase is a lump-sum problem. A phased remodel where a Houston contractor bills you in stages over 18 months is a faucet problem, and that is what a HELOC is built for: you draw what you need and pay interest only on the drawn balance.
Question 3: how will you handle the payment math? Second-lien products typically price higher than first-lien loans because the second lender stands behind your mortgage lender if things go wrong. HELOCs usually float with the prime rate, so the payment can rise after you borrow. A fixed cash-out gives you one predictable payment. Run your debt-to-income both ways; my post on how lenders calculate DTI in Texas shows how underwriters will look at it.
When does a conventional cash-out beat a HELOC?
A cash-out first mortgage usually wins when your existing rate is near or above today’s market, when you want one fixed payment instead of two, and when the amount you need is large enough that a variable second-lien rate creates real payment risk. First-lien money generally prices below second-lien money, so on a big draw the rate spread can outweigh the convenience of keeping an old loan.
A recent example: a San Antonio couple I worked with was carrying a 6.875% loan from 2023 and wanted roughly $60,000 for a kitchen and foundation work. A HELOC quote from their bank floated well above what a new first lien priced at. Rolling everything into one fixed cash-out lowered their blended cost and simplified the payment. Had they been sitting on a 3% loan, my advice would have flipped, and I would have pointed them to a second-lien product I do not even offer. In Texas, remember that a cash-out on your homestead is itself a 50(a)(6) loan, so the 80% cap and the waiting-period rules above still apply. Where rates go from here is anyone’s guess; they may ease or they may not, so the framework has to work at today’s numbers. You can track the weekly averages on my Texas mortgage rates page.
When the right answer is neither
Equity feels like found money, and it is your money, but every one of these products converts it into debt secured by your homestead. If the purpose is a vacation, a car, or an investment pitch that promises to outrun the interest rate, slow down. If the purpose is paying off credit cards, understand you are turning unsecured debt into debt attached to your house, and the plan only works if the card balances stay gone. And if you would land above roughly 43% to 45% DTI after the new payment, most underwriters will get uncomfortable anyway. Waiting, saving, or borrowing less than the maximum are all legitimate outcomes of this framework. At Mortgage Austin we tell people no on cash-out deals more often than you would think, usually because the math serves the lender better than the borrower.
Frequently Asked Questions
How much home equity can I borrow in Texas?
Texas caps combined borrowing against your homestead at 80% of its fair market value. On a $335,000 home with a $200,000 mortgage balance, that leaves about $68,000 of borrowable equity across any product, subject to credit, income, and property qualifications.
Does Texas allow HELOCs?
Yes. Texas HELOCs fall under Section 50(a)(6) of the state constitution, so the 80% combined loan-to-value cap applies, along with the 12-day waiting period and the one-equity-loan-per-12-months rule. Rates are usually variable and move with the prime rate.
Can I get a HELOC and keep my low mortgage rate?
Yes, and that is the main reason to consider one. A HELOC is a second lien, so your existing first mortgage stays exactly as it is. The trade is that second-lien money usually prices higher than first-lien money and the rate can adjust upward after you borrow.
Is a Texas cash-out different from other states?
Yes. A cash-out on a Texas homestead is a 50(a)(6) loan, which means an 80% loan-to-value ceiling, a 12-day wait between application and closing, a 2% cap on certain lender fees, closing at an approved location, and only one equity loan per 12-month period.
What credit score do I need to tap home equity in Texas?
It varies by product and lender. Conventional cash-out loans generally start around a 620 score, with meaningfully better pricing in the 700s. HELOC minimums are set by each bank or credit union and often run higher. Approval is always subject to credit, income, and property qualifications.
Should I use home equity to pay off credit cards?
Sometimes the math works, since mortgage rates run far below card rates. The risk is that you convert unsecured debt into debt secured by your house, and the plan fails if the card balances build back up. Treat it as a one-time reset paired with a budget change, or skip it.
If you are weighing these options on your own house, send me your current rate, balance, and a rough value, and I will run the framework with real numbers. Let’s talk through your options, no pressure and no obligation.
Anthony Ferrando | Mortgage Loan Originator | NMLS# 1919613 | Ferrando Financial LLC NMLS# 2403080 | Licensed in Texas. This is not a commitment to lend. Loan approval is subject to credit, income, and property qualifications. I do not originate HELOCs or standalone home equity loans; comparisons here are educational. Texas home equity lending is governed by Article XVI, Section 50(a)(6) of the Texas Constitution; consult your closing documents for the terms that apply to you. Rate figures are averages from the Freddie Mac Primary Mortgage Market Survey for the week ending July 9, 2026, are illustrative only, and are not a quote or an offer of credit. Sources: Freddie Mac PMMS (July 2026), Texas Real Estate Research Center Texas Housing Insight (June 2026 release, April 2026 data). Equal Housing Lender.
