A cash-out refinance replaces your current mortgage with a new, larger one and hands you the difference as cash you can use for almost anything. In Texas, this is one of the most tightly regulated loans you can get — and that regulation exists to protect you.
What makes it a "Texas 50(a)(6)" loan
Texas is the only state that writes its home equity rules directly into its constitution. A cash-out refinance on your primary residence falls under Article XVI, Section 50(a)(6) of the Texas Constitution — which is why lenders call it a "50(a)(6)," "A6," or simply a "Texas cash-out." Because the rules are constitutional rather than just statutory, they're strict, they're consistent from lender to lender, and a loan that skips a required step can be legally challenged. That's a big reason some national lenders quietly avoid Texas cash-out lending, and why working with someone who knows the Section 50 process matters.
One important consequence: a 50(a)(6) applies only to a homestead — your primary residence. Cash-out on a second home or an investment property follows different rules entirely.
The 80% rule, with real numbers
The single most important limit: your new loan, combined with every other lien on the home, can't exceed 80% of the home's appraised value. At least 20% equity has to stay in the home. This applies to the combined total, not just the new money.
Home appraised at $500,000. 80% of that is $400,000 — the most total debt allowed against the home. If you still owe $300,000 on your mortgage, the most you could take in cash is about $100,000. If you owe $350,000, your maximum cash-out drops to roughly $50,000 — even though you have $150,000 of equity "on paper."
You can put your own numbers into the equity calculator to see your 80% line and your estimated available equity in seconds.
When a cash-out refinance makes sense — and when it doesn't
The deciding factor is usually your current mortgage rate. A cash-out refinance rebuilds your entire first mortgage at today's rate. If your existing rate is already high, or close to today's rates, rolling everything into one new loan can be clean and simple.
But if you locked in a low rate a few years ago, replacing that whole balance at a higher rate just to pull out cash often doesn't pencil out. In that case a second-lien option that sits on top of your existing mortgage — a HELOC or a home equity loan — usually wins, because it leaves your low first-mortgage rate untouched. It's worth running the break-even math against your actual rate before deciding.
Cash-out refinance vs. HELOC vs. home equity loan
All three are capped at 80% in Texas. The difference is structure:
| Cash-out refinance | HELOC | Home equity loan | |
|---|---|---|---|
| Structure | Replaces your first mortgage | Second lien, revolving | Second lien, lump sum |
| Your existing mortgage | Paid off & replaced | Left untouched | Left untouched |
| Rate | New first-mortgage rate | Usually variable | Usually fixed |
| Payout | Lump sum | Draw as needed | Lump sum |
| Best when | Your current rate is high | You want flexibility over time | You want fixed payments on a set amount |
What homeowners use the cash for
The money is generally yours to use as you choose. The most common reasons Texas homeowners pursue a cash-out refinance are debt consolidation (folding higher-interest balances into one payment), home improvements like a kitchen or bathroom remodel, a home addition, or roof and HVAC replacement, and larger life expenses such as education and tuition. You can see more of the everyday reasons on the homepage.
How the process works in Texas
- Estimate your equity. Confirm you're likely under the 80% line before anything else.
- Application and the 12-day notice. Your 12-day cooling-off period starts once you apply and receive (and sign) the required notice. It can't be shortened.
- Appraisal and underwriting. The lender confirms value, credit, income, and existing liens.
- In-person closing. Texas requires you to sign at a lender's office, title company, or attorney's office — not at your kitchen table.
- 3-day rescission. After closing you have three business days to cancel; funds are released only after that window passes, so plan your timing accordingly.
A quick reality check: the estimator and this guide give you a solid starting picture, but they aren't a loan approval. Final numbers depend on your appraisal, credit, income, and existing liens — and not all applicants qualify.