Cash-Out Refinances in Texas: Unlock Your Home Equity with a 50(a)(6)

Texas homeowners often see their houses not just as homes, but as financial assets. With a cash-out refinance, you can tap into your home equity and turn it into cash – a popular strategy for people who bought before the spike in appreciation across homes throughout the US. Whether you're paying off high-interest debt, remodeling a property, or investing in other assets, a cash-out refinance gives you access to a pool of money that's already yours to do with as you please.

Over the past decade, U.S. real estate has seen extraordinary appreciation. Austin prices alone jumped roughly 85% between 2014 and 2024, and while Dallas and Houston haven’t climbed quite as sharply, their gains have still outpaced national averages. That rise in value means homeowners across the state are sitting on unprecedented levels of equity – equity that, through a cash-out refinance, can be converted into a powerful financial resource.

In this guide, we'll break down exactly how a cash-out refi works, the unique legal rules that apply in Texas, who qualifies, and how homeowners in Austin, Dallas, and Houston are using this strategy to build wealth and improve their homes. We’ll also dispel a few myths and give you the information you need to explore your options confidently.

What Is a Cash-Out Refinance?

A cash-out refinance allows you to access the equity you've built in your home by replacing your existing mortgage with a larger one. The difference between your new loan amount and your old loan balance comes to you as a lump sum of cash at closing.

Let’s say your home in East Austin is worth $500,000 and you still owe $300,000 on your mortgage. Under Texas law, you can borrow up to 80% of your home’s appraised value – in this case, $400,000. That means you could potentially access $100,000 in equity, minus closing costs. This cash is yours to use however you see fit: consolidate debt, fund renovations, invest in a second property, or even cover college tuition.

A cash-out refinance is different from a standard rate-and-term refinance, which doesn’t allow you to take cash out and is typically used to get a better interest rate or a different loan term. It’s also not the same as a home equity loan or HELOC, which are usually second liens added on top of your existing mortgage. With a cash-out refi, you’re dealing with one new loan, one monthly payment, and one rate – often fixed.

Texas-Specific Rules: Section 50(a)(6)

Texas is unique in how it regulates cash-out refinances. These loans fall under Section 50(a)(6) of the Texas Constitution, which sets strict rules designed to protect homeowners from predatory lending and over-leveraging their property.

The Big Six Rules:

• 80% Loan-to-Value (LTV) Cap: You cannot borrow more than 80% of your home’s appraised value.

• 2% Cap on Lender Fees: Lender origination fees are capped at 2% of the loan amount, although some third-party fees like appraisals and title insurance are exempt.

• Primary Residence Only: The property must be your primary home. Second homes and investment properties do not qualify.

• One Equity Loan at a Time: You can't have multiple home equity loans. All other liens must be paid off in the refinance.

• 12-Day Waiting Period: You must wait at least 12 days after submitting your loan application before closing.

• 12-Month Rule: You can only do a cash-out refinance on a property once every 12 months.

These rules can sound strict, but they offer strong consumer protection. They prevent borrowers from repeatedly refinancing their equity and ensure you always retain a minimum cushion of ownership in your property.

It's also worth noting that once you do a cash-out refinance under Section 50(a)(6), that loan is legally classified as a home equity loan. If you refinance again later, even without pulling out more cash, you might need to go through additional legal steps unless you "reset" the loan as a non-home-equity refinance. Working with a lender familiar with Texas law is crucial to navigating these nuances.

Why Homeowners Use Cash-Out Refinancing in Texas?

Debt Consolidation

One of the most popular reasons homeowners tap into equity is to pay off high-interest debt. Credit card APRs can easily run 18-24%, while personal loans may charge double-digit rates. By rolling those balances into your mortgage with a cash-out refinance, you can consolidate everything into a single, lower-interest monthly payment.

This strategy is especially attractive for Texas homeowners who are equity-rich but cash-poor. It's a chance to clean up your balance sheet, lower your monthly obligations, and even boost your credit score by reducing revolving balances.

Renovations and Home Upgrades

Another major motivator? Improving the home you already love. In Austin, where zoning rules now allow more flexibility with ADUs (accessory dwelling units), many homeowners are using cash-out funds to build backyard apartments. In Dallas suburbs, we see upgrades like energy-efficient windows, new roofs, or kitchen remodels. In Houston, hurricane-proofing and elevation projects are common post-storm improvements.

These projects not only increase your quality of life but can boost your property’s resale value and marketability. It’s a smart way to reinvest in your biggest asset.

Investment Capital

Cash-out refinancing is also a savvy way to generate funds for new investments. Homeowners might use the money to buy land, invest in rental properties (even outside of Texas), start a business, or simply diversify their portfolio. While borrowing against your home does carry risk, it’s often one of the cheapest ways to access large sums of capital.

Life Events and Emergencies

From covering medical bills to funding education, a cash-out refinance can provide breathing room when life throws a curveball. Instead of draining retirement savings or maxing out credit cards, tapping your home equity could be a more affordable solution – particularly if you're planning ahead for large, foreseeable expenses.

Who Qualifies for a Texas 50(a)(6) Cash Out?

Equity Position

To qualify, your home must have at least 20% equity remaining after the refinance. If your home is worth $500,000, the new mortgage can be no more than $400,000. If you already owe close to that threshold, you won’t be eligible to pull out cash.

Most successful cash-out applicants have at least 30-40% equity before refinancing. This allows room for closing costs and still leaves a solid equity buffer, as required by law.

Credit Score and Income

Lenders generally require a credit score of at least 620 for conventional cash-out loans. The stronger your credit and income profile, the more favorable your rate and terms. Debt-to-income ratios are also key; most lenders look for a DTI under 45%, though exceptions exist for high-income borrowers or those with significant reserves.

Primary Residence and Waiting Periods

The home must be your primary residence to qualify. You also need to wait at least 6 months after purchasing a property before you can do a cash-out refi. If you already did one in the past year, you'll need to wait the full 12-month cooling-off period before doing another cash-out refinance (which is typically not a big deal because your home rarely appreciates enough in 12 months to make a 2nd cash-out refinance worth it.

Real-Life Examples Across Texas

Austin Area: High Appreciation = High Potential

In Dripping Springs, just outside Austin, one homeowner who purchased a home in 2017 for $350,000 saw its value rise to over $650,000 by 2024. After paying their mortgage down to around $250,000, they refinanced at 80% LTV, which allowed them to take out a new mortgage of $520,000. After settling the original loan, they walked away with approximately $270,000 in cash. The funds went toward remodeling their kitchen, paying off their student loans, and investing the rest in the stock market.

Dallas: Upgrades and Strategic Borrowing

In the Dallas suburbs, a family used their cash-out refinance to add a media room, replace aging HVAC systems, and consolidate lingering credit card debt. Their home increased in value from $400,000 to $520,000, giving them the perfect window to refinance and secure funds for long-deferred upgrades without dipping into savings.

Houston: Turning Equity Into Lifestyle

In The Heights, one Houston couple used a cash-out refinance on their longtime primary residence to fund the purchase of a beachfront vacation home in Galveston. Their home had appreciated significantly since they bought it in 2012, and after years of building equity and paying down the principal, they were able to refinance at 80% LTV. The cash they pulled out allowed them to put 20% down on a newly built second home near the seawall and furnish it without dipping into retirement savings.

Not only did this move give them a family getaway for weekends and holidays, but they also plan to list the property on short-term rental platforms when not in use, turning their equity into a supplemental income stream. This is a great example of how Houston homeowners are using cash-out refinancing not just to shore up their finances, but to expand their lifestyle and investment portfolio.

Common Misconceptions

• "Cash-out refinancing is only for people in financial trouble." False. Many financially stable homeowners use this strategy to lower their debt costs, improve their home, or fund strategic investments. It’s not about being desperate – it’s about being smart with your assets.

• "You can only do it once." Wrong. You must wait 12 months between cash-out refis, but there’s no lifetime limit. Many homeowners refinance multiple times over the years as home values rise.

• "It’s the same as taking out a second mortgage." Nope. A cash-out refi replaces your current mortgage with a new, larger one. You end up with just one loan, not two.

FAQ: What Loan Programs Allow Cash-Out Refinancing in Texas?

If you're wondering which types of loans support cash-out refinancing under Texas law, here’s a breakdown of your options:

Conventional Loans: These are the most common vehicles for Texas cash-out refinances. Conventional loans allow cash-out refinancing under Section 50(a)(6) guidelines as long as you meet standard qualifications: 620+ credit score, stable income, and equity to support the 80% loan-to-value cap. Most Texas homeowners who use cash-out refinancing do so with a conventional loan.

VA Loans: Yes, you can do a VA cash-out refinance in Texas – but it still has to follow Texas constitutional restrictions. That means you’re still subject to the 80% LTV cap, the 12-day waiting period, and all the other Section 50(a)(6) requirements. VA loans do not override Texas law. So while eligible veterans can access cash-out refis through the VA program, the loan must still meet state regulations.

FHA Loans: FHA cash-out refinances are technically allowed nationwide, but in Texas they face major limitations. FHA loan programs are not typically compatible with Texas’ Section 50(a)(6) equity lending rules. Most FHA lenders will not offer cash-out refinancing under 50(a)(6) guidelines, which effectively means that FHA cash-outs are rare or unavailable for Texas homeowners.

Jumbo Loans: Jumbo cash-out refinancing is possible in Texas, but it can be trickier to qualify for. These loans exceed conforming loan limits and often come with stricter credit, income, and reserve requirements. Because of the 80% LTV rule and added risk for lenders, jumbo cash-outs are generally best suited for high-equity, high-credit borrowers who meet stringent criteria.

If you’re not sure which loan program fits your situation, your best move is to speak with a Texas mortgage expert. We’ll help you determine eligibility and run side-by-side comparisons to find the right structure for your goals.

No-Closing-Cost Refinances in Texas

One last note before we wrap up: some Texas homeowners exploring cash-out refinancing may also qualify for a no-closing-cost refinance. These structures roll most or all of the closing costs into the interest rate or loan balance, reducing or eliminating the upfront cash needed to close. While your rate may be slightly higher, this strategy can be ideal if you want to preserve cash flow and still access your equity. We explain how that works in our full guide: No Closing Cost Refinance Guide: Refinance Without Fees in 2025.

Let’s Put Your Equity to Work

Whether you're in East Austin, The Heights in Houston, or Frisco in DFW, your home could be one of your greatest untapped financial tools. A cash-out refinance gives you access to the value you've built up over years of homeownership.

At LendFriend, we specialize in Texas refinances and understand the ins and outs of Section 50(a)(6). We’ll walk you through the numbers, explain your options, and help you decide if now is the right time to pull equity from your home.

Want to make the most of your home’s value? Let’s talk. Schedule a call with me today or get in touch with me by completing this quick form and let me help you see how much you can save with a no closing  cost refinance today.

Your home’s working hard. Isn’t it time that equity started working for you?