Texas homeowners have built significant equity. A cash-out refinance lets you access that equity at mortgage rates, which are typically far lower than personal loans, credit cards, or HELOCs. No credit pull to get your rate.
A cash-out refinance replaces your existing mortgage with a new, larger loan. The difference between your new loan amount and your old balance is paid to you in cash at closing. You keep your home, you have one mortgage payment, and you have cash in hand to use however you choose. Because the rate is a mortgage rate rather than a credit card or personal loan rate, it is typically the cheapest way to access a large sum of money.
Texas has specific constitutional rules around cash-out refinancing on primary residences. The total loan after the cash-out cannot exceed 80% of the appraised value, and there is a mandatory 12-day waiting period before closing. These rules are consumer protections unique to Texas. Kris is well-versed in Texas home equity law and ensures every transaction complies. Investment properties and second homes follow standard conventional guidelines and are not subject to the Texas 80% constitutional rule.
Good Candidates for a Cash-Out Refinance
Have at least 20% equity remaining after the cash-out
Current rate is near or below today's market (or equity need outweighs rate increase)
Credit score of 620 or higher (680+ for best pricing)
Need a lump sum for renovations, debt payoff, or other defined purpose
Prefer a fixed rate and single payment over a HELOC
Investment property owners with equity who want to scale their portfolio
Pros and Cons
Advantages
Access equity at mortgage rates, far below credit card rates
No restrictions on use of proceeds
Single monthly payment, no second lien
Interest may be tax deductible when used for home improvements
Fixed rate provides payment certainty
Investment property cash-out not subject to Texas 80% constitutional limit
Things to Consider
Increases your mortgage balance and total interest paid
Texas primary residence limited to 80% LTV (constitutional rule)
Rate may be higher than your current mortgage rate
Closing costs apply (2-5% of new loan amount)
Mandatory 12-day waiting period before closing in Texas
Reduces equity that could otherwise be accessed in an emergency
Frequently Asked Questions
A cash-out refinance replaces your current mortgage with a new, larger loan. The extra amount above your old balance is paid to you at closing. For primary residences, Texas law limits the total loan to 80% of the appraised value and requires a 12-day waiting period. Investment properties and second homes follow standard guidelines without the 80% cap.
Under the Texas Constitution, a cash-out refinance on a primary residence cannot result in total mortgage debt exceeding 80% of the appraised home value. On a $500,000 home with a $200,000 existing mortgage, the maximum new loan is $400,000 (80% of $500,000), leaving a maximum cash-out of $200,000 before closing costs.
Texas does not restrict how you use the proceeds. Common uses include home renovations and additions, consolidating high-interest debt (credit cards, student loans, auto loans), funding a down payment on an investment property, covering education or medical costs, and building emergency reserves.
Most lenders require you to retain at least 20% equity after the cash-out (80% max LTV). The amount you can access equals your home value times 80%, minus your existing mortgage balance and closing costs. Kris runs this calculation quickly with a free no-credit-pull assessment.
It depends on your situation. A cash-out refi gives you a fixed rate and a lump sum in one loan. A HELOC is a revolving line of credit, usually at a variable rate. If you need a defined amount at a fixed rate and want simplicity, cash-out refi is typically better. If you need flexibility to draw and repay over time, a HELOC may be preferable. Kris can compare both for your specific situation.
The cash you receive is not taxable income. Interest may be tax deductible when the proceeds are used for home improvements, subject to standard mortgage interest deduction limits. Always consult a tax advisor for your specific situation.
