Texas Home Equity Loan Rules: What Dallas Homeowners Need to Know in 2026

What Is a Texas Home Equity Loan?

A Texas home equity loan is a fixed-rate, lump-sum second mortgage secured by your primary residence. You borrow a set amount, receive it in a single disbursement, and repay it in equal monthly installments over a term of 5 to 20 years. It leaves your first mortgage in place.

What makes Texas different from almost every other state is that home equity lending is governed directly by the Texas Constitution, specifically Article XVI, Section 50(a)(6). That means the rules are not set by the legislature or a bank's underwriting policy. They are embedded in the state's foundational legal document. Lenders cannot waive them, regardless of your creditworthiness or the size of the loan.

If you have heard people mention "a Section 50(a)(6) loan" or an "A6 loan," those are the same thing described here.

By Paul Blair | September 28, 2026

The constitutional status of Texas home equity rules creates a layer of protection for homeowners that does not exist in most states. It also creates a process that surprises a lot of borrowers who have refinanced or taken equity out of a home in another state.

Here is what you need to know before you apply.

The 80% Cap: How Much You Can Actually Borrow

The most important number in Texas home equity lending is 80%. The total of all liens against your home, including your existing first mortgage and the new equity loan, cannot exceed 80% of your home's fair market value.

This is not a lender guideline. It is a constitutional limit.

An example using a typical Dallas home:

• Home value: $350,000
• 80% of value: $280,000
• Existing first mortgage balance: $175,000
• Maximum equity loan: $105,000 (which is $280,000 minus $175,000)

Dallas median home values sit around $320,000, according to market data from CCCRES. At that value with a $160,000 mortgage balance, most homeowners are looking at roughly $96,000 in available equity borrowing, assuming they have built sufficient equity.

The cap serves as a buffer. Texas homeowners can never be put in the position of owing more than 80% of their home's value through an equity loan, no matter what a lender might prefer to offer them.

Thinking about tapping your equity? Before you borrow, it's worth knowing what your home is worth today. Get a free home value estimate at greysq.com/home-value and I will follow up with a full market analysis for your neighborhood.

The Timing Rules That Catch Borrowers Off Guard

Texas law builds in two waiting periods that do not exist in other states.

The 12-day waiting period. Your lender must provide the required disclosures and notices at least 12 calendar days before closing can occur. The clock starts the day you receive those documents. This period cannot be shortened, waived, or accelerated regardless of your timeline or the lender's.

The 3-day right to rescind. After you sign at closing, you have three business days to cancel the loan with no penalty. Your funds are not released until that window expires. This is a consumer protection guarantee built into the constitutional framework.

Add in time for the application, appraisal, and underwriting, and the full process typically takes 30 to 45 days from application to funded loan, according to the Credit Union of Texas home equity loan guide.

If you are in a hurry, budget accordingly. There is no expedited option on a Texas home equity loan.

The One-Loan-at-a-Time Rule

Texas does not allow you to carry two home equity loans simultaneously. You can only have one active Section 50(a)(6) loan against a property at a time.

Additionally, after closing a home equity loan, you must wait at least 12 months before taking out another one on the same property. The one-year clock resets each time.

Where You Have to Close

In Texas, a home equity loan closing must happen at a title company, an attorney's office, or the lender's designated office. It cannot take place at your home, your workplace, or a coffee shop.

This sounds like a minor procedural point, but it comes up often when homeowners expect the convenience of a "kitchen table" closing they may have experienced with other loan types.

The lender is also capped at 2% of the loan principal in fees they can charge for their services. Third-party costs such as the appraisal, title insurance, and property survey do not count toward that cap. There are no prepayment penalties on Texas home equity loans.

The "Once an Equity Loan, Always an Equity Loan" Rule

This is the rule that surprises people most when they go to refinance.

Under Texas Constitution Section 50(f)(2), if you refinance a home equity loan, the new loan is also treated as a home equity loan. The constitutional restrictions and protections travel with it. Your lender cannot use the refinance to convert a Section 50(a)(6) loan into a regular rate-and-term refi that operates outside those rules.

There is a process to convert an equity loan into a non-equity loan over time, but it requires that the loan be paid down, that the property no longer carry an equity lien, and that specific disclosures be completed. This is not a routine transaction.

The practical implication: before you take out a home equity loan, consider whether you might want to do a different type of refinance in the future. Once you originate a Section 50(a)(6) loan against your homestead, that property carries the equity-loan designation until specific steps are taken to clear it.

Have questions about your specific situation? Whether you are thinking about borrowing against your home or considering selling, I am happy to talk through what makes sense for your timeline. Reach out at greysq.com/contact.

Home Equity Loans and Selling: What Happens at the Title Company

A home equity loan is a lien. When you sell your Dallas home, both your first mortgage and the outstanding equity loan balance are paid off at closing from your sale proceeds. The title company handles the payoffs simultaneously.

This is routine and generally straightforward, provided your sale price covers both balances. The payoff amount will include any interest accrued to the closing date, which the title company calculates based on a per diem figure provided by your lender.

You do not need to pay off the equity loan before you list the home. The lien clears at closing.

For more on how liens are handled at the title table, see Property Liens When Selling a Dallas Home.

Texas Home Equity Loan vs. HELOC vs. Cash-Out Refinance

These three products are often confused. They all let you access your home equity. The mechanics and the implications differ.

All three are governed by the same Section 50(a)(6) constitutional framework in Texas when they involve extracting equity from a homestead. The 80% cap, 12-day wait, and other protections apply across all three.

For a deeper look at the HELOC option specifically, see HELOC in Texas: What Every Dallas Homeowner Needs to Know. For the cash-out refi route, see Cash-Out Refinance in Texas.

Qualifying: What Lenders Look For

Beyond the constitutional LTV cap, lenders evaluate:

• Credit score: Most lenders want 670 or above. 620 is a common minimum. Higher scores unlock better rates.
• Debt-to-income ratio: Generally 43% to 45% maximum. Divide your total monthly debt payments by your gross monthly income.
• Documentation: Pay stubs, two years of tax returns, bank statements, current mortgage statement, and proof of homeowner's insurance.

If you live in Dallas or Collin County, the appraisal used for underwriting will be based on the lender's commissioned appraisal, not the county's tax assessment. In a market where county appraisals sometimes run below actual market value, the lender's independent appraisal typically produces a higher (and more accurate) number.

A Note on Tax Deductibility

Home equity loan interest is potentially tax-deductible if the proceeds are used to "buy, build, or substantially improve" your home. Under TCJA rules that remain in effect as of 2026, interest on a home equity loan used for debt consolidation, a vacation, or other non-improvement purposes is generally not deductible.

Consult your CPA or tax advisor for guidance specific to your situation. The Finance Commission of Texas and the Texas Real Estate Research Center at Texas A&M are the authoritative sources on the regulatory framework if you want to read the rules directly.

Frequently Asked Questions

What is the Section 50(a)(6) rule in Texas?

Section 50(a)(6) is the provision of the Texas Constitution that governs home equity lending. It sets the rules for any loan that allows a homeowner to borrow against their primary residence's equity, including home equity loans, HELOCs, and cash-out refinances. The constitutional status means lenders cannot waive these protections, and they apply statewide to every eligible homestead.

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

Plan for 30 to 45 days. The mandatory 12-day waiting period after disclosure delivery, combined with the appraisal and underwriting process, makes faster timelines difficult. The 3-day right of rescission after signing also means funds are not available until several days after your closing date.

Can I get a home equity loan on a rental property in Texas?

No. Section 50(a)(6) applies only to your homestead, which is your primary residence. Investment properties, second homes, and rental properties are not eligible for Texas home equity loans. You would need to look at a different loan type, such as a DSCR loan or a portfolio product, for equity access on non-homestead properties.

What happens to my home equity loan when I sell my house?

Your home equity loan is a lien. When you sell, the title company pays off both your first mortgage and the equity loan balance from the sale proceeds. You do not need to pay it off before listing. As long as your sale price covers both balances, the transaction closes normally.

How do I choose the right agent when I'm considering selling a home with a home equity loan or other lien?

Work with an agent who regularly handles transactions where liens are involved and who has a strong relationship with title companies in your market. Your agent should be able to walk you through the payoff process and help you understand your net proceeds before you commit to a list price. An experienced local agent will know how to coordinate between your lender and the title company so nothing slows down your closing.

The Bottom Line

Texas home equity lending is more regulated than anywhere else in the country, and that regulation exists to protect you. The 80% cap means you cannot over-leverage your home. The 12-day waiting period means you cannot be rushed into a decision. The 2% fee cap limits what lenders can charge. The judicial foreclosure requirement means a lender cannot take your home without going through the courts.

If you are a Dallas homeowner thinking about tapping your equity, understanding these rules ahead of time will save you from surprises mid-process.

And if you are also thinking about selling, it is worth running both scenarios side by side. Sometimes the math on selling and moving looks better than borrowing, especially in a market where appreciation has already done the heavy lifting.

I'm happy to walk you through either path. Get a free home value estimate at greysq.com/home-value or reach out directly at greysq.com/contact.

About Paul Blair Paul Blair is the founder and broker of Grey Square, a virtual real estate brokerage representing buyers and sellers across Dallas and Los Angeles. With 22 years in the business and more than $200 million in closed transactions, Paul works the full range of the market, from luxury homes in the Park Cities and Preston Hollow to estates in the Hollywood Hills and across the Westside. Connect with Paul and the Grey Square team at greysq.com. TX TREC #9011505 | CA DRE #01792671.