A cash-out refinance replaces your current mortgage with a larger one and gives you the difference in cash, or uses it to pay off other debts. In Texas, if the house is your homestead, the loan also has to follow the home equity rules in the Texas Constitution, Article XVI, Section 50(a)(6). The biggest one: all the loans against your home combined can't be more than 80 percent of its fair market value, and the loan can't close until at least 12 days after you apply and get the required notice. On top of that, the loan program (FHA, conventional, or VA) has its own rules.
Here's how a cash-out refinance works, what Texas adds, what each program checks, and when a second lien might be the better fit.
The new loan pays off your existing mortgage and any other liens, covers closing costs, and the rest goes to you or to creditors you choose. It's a full new loan: new application, new appraisal, new underwriting, and a new payment that has to fit your debt-to-income ratio. It's different from a rate-and-term refinance, which changes your rate or term without giving you cash.
Texas protects homesteads more than most states. Since 1998, Section 50(a)(6) has allowed home equity loans only under strict conditions. Any loan on your homestead that puts cash in your pocket, or pays off debts that weren't already liens on the house, falls under it, whatever the lender calls it. My Texas cash-out rules article goes deeper; here are the main ones (Tex. Const. Art. XVI, Sec. 50(a)(6)):
One correction to something you may have read: the old ban on home equity loans secured by homesteads with an agricultural tax designation was repealed in 2017. Paragraph (I) of Section 50(a)(6) now reads "(repealed)."
VA also offers cash-out refinances to eligible veterans. On a Texas homestead, a VA cash-out still has to meet Section 50(a)(6), including the 80 percent combined cap, because the constitution governs every lien on a homestead.
Section 50(a)(6) protects homesteads only. A cash-out on a Texas second home or rental follows the loan program's rules for that occupancy, not the constitution's home equity rules. FHA doesn't allow cash-out on non-owner-occupied property at all. Conventional programs set their own limits by occupancy, and for investment property, a DSCR or other non-QM loan may also be an option.
Because of the 12-day wait, the one-business-day final disclosure, and the three-day rescission period, a Texas homestead cash-out has a built-in minimum timeline no lender can shorten. In practice: you apply and receive the Section 50 notice, the appraisal and title work are ordered, underwriting runs during the waiting period, you close at an approved location, and the loan funds after the rescission period ends. If you need money by a certain date, like a tuition deadline or a contractor's start date, start early.
A cash-out refinance replaces your first mortgage. If your current first mortgage has a rate you want to keep, refinancing the whole balance to get cash may not make sense. A closed-end second mortgage or a home equity line of credit leaves your first mortgage alone and adds a second lien for just the new money. In Texas, a home equity line on your homestead is also governed by Section 50, with its own rules (50(t)). My second lien and HELOC article compares them.
The useful comparison is the full cost over the time you expect to keep the loan: a new first loan on the whole balance versus your current first loan plus a second on only the new money.
Paying off a car or credit cards with a cash-out turns shorter-term debt into a lien on your home, stretched over a much longer term. Your monthly payments may drop, but you may pay that debt for decades. Sometimes it's still the right call. Just compare total cost, not only the monthly number. If creditors are paid directly at closing, those debts can come out of your debt-to-income calculation.
Once your homestead loan is a Section 50(a)(6) loan, it generally stays one if you refinance with new cash. Section 50(f)(2) lets you refinance it into a regular, non-home-equity loan only if the refinance closes at least one year after the original loan, includes no new money beyond paying off the debt and actual costs and reserves, stays within 80 percent of fair market value, and you get a specific written notice at least 12 days before closing. That notice warns you'd give up protections like court-ordered foreclosure and no personal liability.
This example is made up to show how the rules stack.
Marisol owns a home in Fort Worth's Ryan Place and wants cash for a roof and to pay off a car loan. Her existing first mortgage is a few years old, and there are no other liens. The appraisal sets the value, and under Section 50 her new loan can't exceed 80 percent of it. The car loan isn't a lien on the house, so paying it off with the cash makes this a Section 50(a)(6) loan. She gets the Section 50 notice the day she applies, the file is underwritten during the 12-day wait, she receives her final itemized disclosure the business day before closing, signs at a title company with her husband consenting, and the loan funds after the three-day rescission period.
If you're thinking about pulling equity from a Fort Worth home, let's look at your equity, your current loan, and what you need the money for, with the Texas rules in view from the start. Book a call, or when you're ready, start an application.
Links checked Oct 21, 2026.
About the author: McKade Lively, NMLS 2704474, American Pacific Mortgage Corporation dba True North Home Loans, NMLS 1850.
Equal Housing Opportunity.
Last reviewed: Oct 2026