What is Texas Section 50(a)(6)?

Article XVI Section 50(a)(6) of the Texas Constitution governs home equity loans (HEL) and HELOCs on Texas homesteads. It imposes constraints not present in most other states: an 80 percent CLTV cap, a 2 percent fee cap, a requirement that only one home equity loan be on a homestead at a time, a 12-day disclosure waiting period, and several other protective provisions for borrowers.

Can I have a HELOC and a home equity loan on the same Texas home?

No. Texas 50(a)(6) explicitly permits only one home equity loan against a homestead at a time. If you have a HELOC, you cannot simultaneously have a HEL on the same property. Refinancing one into the other is permitted; running them in parallel is not.

What is the Texas 80 percent CLTV cap?

Total combined loan-to-value on a Texas homestead may not exceed 80 percent. This includes the existing first mortgage plus any home equity loan or HELOC. Lenders cannot extend a HELOC that, when combined with the existing mortgage, would exceed 80 percent of fair market value.

Are HELOC and HEL fees capped in Texas?

Yes. Fees that the borrower pays to the lender and third parties (excluding interest, surveys, appraisals, and certain other specified items) are capped at 2 percent of the loan principal under the current 50(a)(6) framework. This was reduced from 3 percent by constitutional amendment in 2017.

STATE RULES · TEXAS · MAY 2026

Texas Home Equity: Constitutional Cap, One-Loan Rule, 2 Percent Fee Cap

Texas is the most-restrictive state in the United States for home equity borrowing. The restrictions are constitutional, written into Article XVI Section 50 of the Texas Constitution, and have been amended multiple times over the past quarter-century with the broad effect of expanding access while preserving strong borrower protections. The current 50(a)(6) framework imposes an 80 percent CLTV cap, a 2 percent fee cap, a one-loan-on-homestead-at-a-time rule, and a 12-day disclosure waiting period. Texas borrowers should understand these rules before applying; they materially affect product availability, lender choice, and total cost.

The Constitutional Frame

Texas was historically the only state that prohibited home equity loans entirely. The 1997 constitutional amendment first permitted them, and subsequent amendments (in 2003, 2013, and 2017) progressively expanded access. The current rules are codified in Texas Constitution Article XVI Section 50. The implementing statute is the Texas Finance Code Chapter 343 and related Office of Consumer Credit Commissioner regulations.

Because the rules are constitutional, they cannot be overridden by lender contract or state statute alone. A lender that violates the requirements (charges fees over the 2 percent cap, lends past 80 percent CLTV, fails to honour the 12-day waiting period) faces substantial penalties including loss of the right to foreclose on the loan in question.

For a borrower this is unambiguously protective: Texas home equity lenders are heavily incentivised to be compliant. Many national lenders simply do not lend in Texas or treat it as a specialist market with dedicated underwriting flow.

The 80 Percent CLTV Cap

In most states, a HELOC at 85 or 90 percent CLTV is widely available; Figure, Aven, and several other lenders offer up to 89.99 percent CLTV. In Texas this is prohibited by the constitution. The maximum CLTV is 80 percent total, which means combined first mortgage plus HELOC or HEL cannot exceed 80 percent of fair market value.

Worked example: a Texas homestead worth 500,000 dollars, existing first mortgage balance 350,000 dollars. Maximum total home equity financing under 50(a)(6) is 400,000 dollars (80 percent of 500,000). The HELOC or HEL available to the borrower is therefore 50,000 dollars (400,000 cap minus 350,000 existing mortgage). In a non-Texas state at the same price and balance, a 90 percent CLTV product could provide 100,000 dollars; the Texas borrower has access to half that.

The cap is binding for many Texas borrowers in the early years of homeownership when first-mortgage balances are still high relative to home value. It becomes less binding as the first mortgage pays down or home values rise. Compare to our 80 percent CLTV page for the non-Texas perspective on the same threshold.

The 2 Percent Fee Cap

Total fees paid by the borrower at closing on a Texas home equity loan (including origination, processing, underwriting, document preparation, courier, recording, title insurance, broker compensation, and other items, but excluding interest, survey, appraisal, credit report, and a few other enumerated items) cannot exceed 2 percent of the loan principal.

On a 100,000 dollar Texas HELOC, the borrower's total covered closing fees cannot exceed 2,000 dollars. This is meaningfully tighter than the 3 to 5 percent typical in non-cap states. The 2017 constitutional amendment reduced the cap from 3 percent to 2 percent; the tightening has further compressed lender margins in Texas home equity.

Many national lenders adjusted their fee structures rather than exit Texas. The Office of Consumer Credit Commissioner periodically publishes guidance on which fee categories count toward the cap; the exact accounting is technical and lender compliance teams handle it. Borrowers should still ask for an itemised list of fees and confirm the total is within 2 percent.

The One-Loan-At-A-Time Rule

A Texas homestead can have only one home equity loan or HELOC outstanding at a time, in addition to the first-mortgage acquisition indebtedness. This is a constitutional restriction with no workaround. Borrowers cannot stack a 50,000 dollar HEL with a 50,000 dollar HELOC on the same Texas homestead.

A second consequence: refinancing one home equity product into another typically requires paying off the original before originating the new one. Some lenders handle the close-and-replace at the same closing, but the rule that only one is outstanding at any moment must be honoured.

The 12-month wait between home equity loans on the same homestead is another wrinkle. A Texas homestead cannot have a new home equity loan within 12 months of the last one. Refinances of an existing home equity loan are permitted (subject to other rules) without triggering the 12-month wait, but a fresh new home equity loan must wait.

The 12-Day Disclosure Waiting Period

Texas home equity loans cannot close until 12 days after the lender provides the borrower with a written notice (the "Notice Concerning Extension of Credit") describing key terms and rights. The 12-day clock is separate from any federal three-day rescission window under TILA. The cumulative effect: a Texas home equity transaction has a minimum 12-day delay from notice to closing, plus a 3-day federal rescission window after closing.

For borrowers with time-sensitive cash needs (contractor wants a deposit this week), the 12-day clock is a real constraint. Texas borrowers should start the HELOC or HEL process at least 4 to 6 weeks before the cash is needed.

Lenders Active in Texas Home Equity

Major banks (Bank of America, Chase, US Bank, Wells Fargo) all lend in Texas with 50(a)(6) compliant programs. Credit unions (Randolph-Brooks Federal, PenFed which operates nationally) are active. Digital lenders Figure and Aven operate in Texas with adapted programs reflecting the constitutional constraints (lower max CLTV, fee structures recompiled to the 2 percent cap).

Borrowers may notice that some lenders' Texas rate offers are slightly worse than their out-of-state rate offers; this reflects the tighter fee constraints and the loss-of-foreclosure-right risk if compliance fails. The premium is typically 25 to 75 basis points.

Common Texas Home Equity Gotchas

First gotcha: the homestead determination. The Texas homestead exemption covers up to 10 acres for urban property or 200 acres for rural property (100 acres for a family). If your property includes acreage above the homestead limit, the non-homestead portion is treated differently and the 50(a)(6) rules may not apply to encumbrance of that portion. This is unusual for typical urban borrowers but matters for rural Texas borrowers.

Second gotcha: business use. A 50(a)(6) home equity loan cannot be used for business purposes. Borrowers planning to use loan proceeds to fund a business should consult counsel about whether the use complies. The constitutional language is broad here and enforcement has been variable; the safe course is to use the loan for clearly personal or family purposes only.

Third gotcha: the closing-table location. 50(a)(6) requires the closing to occur at the office of the lender, an attorney, or a title company. Mobile or in-home closings are not generally permitted for Texas home equity. Some lenders have adapted with attorney-network arrangements that allow more flexibility; verify before signing.

Frequently Asked Questions

Can I use a Texas HELOC for renovations on my homestead?

Yes, with the constraint that you cannot exceed 80 percent CLTV. Substantial improvements to the homestead are a common HELOC use case and qualify for federal tax deductibility under TCJA framework if the property is your primary residence and total acquisition indebtedness stays under 750,000 dollars.

What happens if my lender violates 50(a)(6)?

Substantial. Per the constitution, a lender that fails to comply with the requirements after notice and opportunity to cure can lose the right to foreclose on the loan. This creates strong incentive for lender compliance and is one reason national lenders treat Texas home equity as a specialist underwriting flow.

Can I refinance my Texas first mortgage and take cash out?

Yes, but the cash-out portion is constrained by the same 50(a)(6) rules including the 80 percent CLTV cap and 2 percent fee cap. The resulting loan is treated as a home equity loan under Texas law and acquires the protections (and constraints) of that classification.

Does 50(a)(6) apply to investment properties in Texas?

No. The constitutional rules apply specifically to homestead property. Texas investment properties are treated like investment properties in most states and follow conventional underwriting rules without the 80 percent CLTV cap or 2 percent fee cap. Cash-out refinance of an investment property is a separate transaction.

Is HELOC interest deductible for Texas borrowers under TCJA?

Yes, on the same terms as for other states: only when the proceeds substantially improve the home securing the loan, and combined acquisition indebtedness stays under 750,000 dollars. See our tax-deductible interest page for federal rules.

Keep Reading

New York: recording tax and CEMA Florida: homestead protection vs equity borrowing 80% CLTV: bank-friendly ceiling Federal tax-deductible interest Figure in Texas: 2 percent cap adapted Bank of America in Texas

Not legal or mortgage advice. Texas 50(a)(6) is a complex constitutional framework; consult a Texas-licensed attorney and lender for transactional specifics. Rules current May 2026.