A Texas cash-out refinance loan is also called a Section 50(a)(6) loan. With this option, you refinance your current mortgage while tapping your home’s equity. This tapped equity converts into cash paid out at closing. The cash can be used for anything you’d like, from home improvements to paying off higher-interest debt.
Recent changes to Texas Cash Out loans
In November 2017, Texas voters amended the Texas Constitution and changed the rules related to pulling equity out of your home. As a result, the Texas cash-out refinance loan is friendlier and more flexible for Texas consumers.
Overview of Changes:
You can now refinance your Section 50(a)(6) loan
You are now able to refinance your loan from cash-out to a rate/term refinance without pulling cash out. Prior to this change “once a cash-out, always a cash-out” was the rule, which caused consumers to be charged fees even when they did not pull cash out on a refinance.
Loan fees have decreased
Now the max fees are 2 percent; before, they were 3 percent of the original loan amount.
**Note that the fees don’t include appraisal and survey costs, title insurance premiums, a title exam report, or discount points used to buy down the interest.
Now you can qualify for a Texas cash-out. Prior to this change consumers with agricultural properties such as a farm were unable to pull cash out due to their agricultural exemptions.
- FHA, VA, and USDA loans are not permitted under Section 50(a)(6) rules.
- You are legally allowed to get a Texas cash-out only once per year.
- Texas cash-out rules only apply to your primary residence. This means your investment or second homes are not bound to these rules.