A HELOC in Texas is allowed on your homestead, but the Texas Constitution writes many of its terms. Under Article XVI, Section 50(t), a Texas home equity line of credit must keep your full credit line plus all other homestead debt at or below 80% of the home's value, set a $4,000 minimum for each advance, bar credit cards, debit cards, and unsolicited checks, collect fees only at closing, and require payments of at least the interest during the draw period. Because a Texas HELOC is a Section 50(a)(6) home equity loan, it also gets the state's 12-day waiting period, 2% fee cap, and other equity loan protections.
I'm Taylor Ring, a Mortgage Loan Officer with Fairway Independent Mortgage Corporation (The Wood Group) in Belton. My Texas cash-out refinance rules guide covers the general (a)(6) rules. This one focuses on what's different about a line of credit. It draws on the Texas Constitution, the state's official home equity interpretations in 7 Texas Administrative Code Chapter 153, and CFPB guidance, read October 21, 2026.
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Texas HELOC Rules at a Glance
| Rule | What It Means for You | Source |
|---|---|---|
| 80% combined limit | Your maximum line plus all other homestead debt can't exceed 80% of fair market value | Section 50(t)(5); 7 TAC 153.86 |
| $4,000 minimum advance | Every single draw must be at least $4,000 | Section 50(t)(2) |
| No cards or unsolicited checks | No credit card, debit card, similar device, or preprinted checks you didn't request | Section 50(t)(3); 7 TAC 153.84 |
| Fees only at closing | Fees are charged when the line is set up, never per draw | Section 50(t)(4); 7 TAC 153.85 |
| No one-sided changes | The lender can't change the terms on its own | Section 50(t)(7) |
| Payment rules | At least the accrued interest during the draw period; substantially equal installments after | Section 50(t)(8); 7 TAC 153.88 |
| One equity loan at a time | You can't have a HELOC and another (a)(6) equity loan on the same home | Section 50(a)(6)(K); 7 TAC 153.10 |
| Standard (a)(6) protections | 12-day wait, 2% fee cap, closing at an approved office, one-year rule, rescission | Section 50(a)(6) |
What Makes a Texas HELOC Different
The CFPB describes a HELOC as an "open-end" line that lets you borrow repeatedly against your equity. It also says that, typically, "you use special checks or a credit card to draw on your line of credit." HELOC loans in Texas don't work that way. Texas law only permits an open-end equity loan if it meets every condition in Section 50(t).
The 80% Limit Applies to the Whole Line
Under 7 TAC 153.86, the maximum line amount is set at closing and doesn't change for the life of the HELOC. At closing, the maximum line plus the balances of all other debts secured by your home can't exceed 80% of fair market value. Every advance must also fit: the new draw, plus your HELOC balance, plus your other homestead debts as of closing, must stay within that 80%.
Hypothetical example: A home in Georgetown is worth $400,000, and the owners owe $220,000 on their first mortgage.
| Step | Amount |
|---|---|
| 80% of fair market value | $320,000 |
| Minus first mortgage balance | $220,000 |
| Largest possible HELOC line | $100,000 |
If their home's value rises later, the line doesn't grow, because the maximum is fixed at closing. Round illustrative numbers, not an offer of credit. Lenders may set lower limits.
The $4,000 Minimum Draw
Each advance must be at least $4,000. That makes a Texas HELOC better for larger planned expenses, like a remodel paid in stages, than for small everyday purchases.
How You Can Get Money From the Line
7 TAC 153.84 lists what's allowed:
- Contacting the lender directly for an advance
- Telephone or electronic fund transfers
- Prearranged drafts, written transfer instructions, or preprinted checks you specifically request
What's not allowed: a credit card, a debit card, or similar device, or the lender mailing you checks you didn't ask for. You can use a reorder form to request a specific number of checks, but you can't ask the lender to send them periodically. In-person visits aren't required.
Who can draw: any owner who is also a named borrower can request an advance, but your agreement can limit which borrowers may request one or require everyone to consent (7 TAC 153.82).
Fees Only When the Line Is Set Up
Section 50(t)(4) says fees covered by the (a)(6) fee rules can be charged only when the line is established, which 7 TAC 153.85 defines as the closing date. No fee can be charged for any draw. Those closing fees also count toward the 2% fee cap, which my cash-out refinance rules guide breaks down.
Payment Rules During and After the Draw Period
- Payments come no more often than every 14 days and no less often than monthly.
- Repayment must begin within two months of the line being established. Under 7 TAC 153.88, repayment isn't required until two months after your first advance, and if your balance is zero, no payment is due.
- During the draw period, each payment must at least cover the accrued interest.
- After the draw period, payments must be substantially equal.
- You can always pay more often or earlier than required.
No One-Sided Changes
Section 50(t)(7) says the lender or holder may not unilaterally amend the HELOC. Read the agreement carefully before closing, since the terms you sign are the terms you keep.
Which Texas Homes Can Have a HELOC
A HELOC is one kind of (a)(6) equity loan, so the (a)(6) limits on the home and your other debts apply:
- Only one equity loan at a time. 7 TAC 153.10 says an owner may have only one equity loan at a time, and it must be the only debt on the home unless the other debt is a purchase loan, an ordinary refinance, or another type the Constitution permits. If your current first mortgage is already a Texas cash-out (a)(6) loan, you generally can't add a HELOC on top.
- The one-year rule. Under 7 TAC 153.14, a new equity loan can't close within one year of another equity loan's closing on the same home, even if that loan was paid off.
- Your homestead only. The loan can't be secured by any other property. If you haven't claimed your homestead, see how to file a homestead exemption in Texas.
HELOC vs. Cash-Out Refinance vs. Home Equity Loan in Texas
All three are (a)(6) loans in Texas when they take equity out of your homestead, so the 80% limit, 2% fee cap, and 12-day wait apply to each. The differences are in how you get the money and what happens to your current mortgage.
| HELOC | Cash-Out Refinance | Home Equity Loan | |
|---|---|---|---|
| How you get money | Draw as needed, $4,000 minimum per draw | One lump sum at closing | One lump sum at closing |
| Your current mortgage | Stays in place | Paid off and replaced | Stays in place |
| Typical rate type (CFPB) | Usually variable | Variable or fixed | Usually fixed |
| Payments | At least interest while drawing, then substantially equal | Substantially equal installments | Substantially equal installments |
| 80% combined limit | Yes, on the full line | Yes | Yes |
| 2% fee cap and 12-day wait | Yes | Yes | Yes |
| Borrow again later | Yes, up to the line during the draw period | Needs a new loan | Needs a new loan |
| Good fit for | Costs spread over time | Changing your first mortgage and getting cash | A known, one-time amount |
The CFPB also notes cash-out refinances generally have higher closing costs and may stretch out your payoff, while a HELOC's payment can vary and is often due in full when you sell. My refinance loans page compares a cash-out refinance with other options.
What Affects HELOC Rates in Texas
I don't quote rates in articles, because they change and depend on your situation. Here's what drives them, per the CFPB's HELOC booklet:
- Index plus margin. Most HELOCs have a variable rate made of an index, such as the U.S. prime rate or a Constant Maturity Treasury rate, plus a margin the lender adds.
- Introductory rates. Some lenders offer a temporary discounted "teaser" rate for a short period, such as six months. Ask what the rate becomes afterward.
- Caps and floors. Ask how high and how low the rate can go.
- Fixed-rate options. Some HELOCs let you lock part of the balance at a fixed rate, which CFPB says is typically higher than the variable rate but more predictable.
- Each lender's own terms. Lenders set their own pricing and requirements, so get more than one offer.
Lenders must disclose the APR, variable-rate details, payment terms, and draw requirements. Compare those side by side, along with annual fees and closing costs.
Before You Apply: A Texas HELOC Checklist
- Confirm the home is your homestead and gather balances for every lien on it.
- Check whether your current loan is an (a)(6) loan. If it is, a HELOC generally isn't available until that changes.
- Estimate 80% of your value and subtract what you owe to see your possible line.
- Plan draws of $4,000 or more, timed to your project.
- Allow time. You can't close before the 12th day after the later of your application or the lender's home equity notice.
- Ask each lender about the index, margin, caps, draw period, repayment period, and fees.
- Know your exits. Texas gives you three days after closing to rescind an equity loan, and CFPB notes federal law gives a three-day right to cancel a credit line.
Frequently Asked Questions
Are HELOCs allowed in Texas?
Yes. Texas has allowed home equity lines of credit on homesteads since a 2003 constitutional amendment, under Article XVI, Section 50(t). A Texas HELOC must also meet the Section 50(a)(6) home equity rules, including the 80 percent limit, the 2 percent fee cap, and the 12-day waiting period before closing.
How much can I borrow with a HELOC in Texas?
Your maximum line plus all other debt secured by your homestead cannot exceed 80 percent of the home's fair market value. For example, on a home worth 400,000 dollars with a 220,000 dollar mortgage, the largest possible line is 100,000 dollars. The maximum is set at closing and does not change, and lenders may set lower limits.
What is the minimum draw on a Texas HELOC?
Each advance on a Texas HELOC must be at least 4,000 dollars under Section 50(t)(2) of the Texas Constitution. Fees can be charged only when the line is set up at closing, so no fee can be charged for an individual draw.
Can I use a debit card or checks with a Texas HELOC?
You cannot use a credit card, debit card, or similar device to draw on a Texas HELOC, and the lender cannot send preprinted checks you did not request. You can request advances by contacting the lender, by telephone or electronic transfer, or with preprinted checks you specifically ask for.
What is the difference between a HELOC and a cash-out refinance in Texas?
A cash-out refinance replaces your current mortgage with a larger loan and pays you a lump sum at closing. A HELOC keeps your current mortgage and gives you a line you can draw from as needed, with a 4,000 dollar minimum per draw. Both are Texas home equity loans subject to the 80 percent limit and 2 percent fee cap.
Let's Look at Your Equity Options
I'll walk through how the Texas rules apply to your home and compare a cash-out refinance with your other options, so you can pick the one that fits.
Get Pre-Approved | Book a Free Consultation
Related Guides
- Texas Cash-Out Refinance Rules
- Refinance Loans
- Closing Costs in Texas
- How to File the Homestead Exemption in Texas
- Conventional Loans
Sources
- Texas Constitution, Article XVI, Section 50, including Subsections (a)(6) and (t)
- 7 Texas Administrative Code Chapter 153, Home Equity Lending: Sections 153.82, 153.84, 153.85, 153.86, and 153.88 (HELOC interpretations), plus 153.10 and 153.14 (Cornell LII mirror of the Texas Administrative Code)
- CFPB: What is a HELOC?, What is a home equity loan?, and What You Should Know About Home Equity Lines of Credit
Taylor Ring, NMLS #2809683 | Fairway Independent Mortgage Corporation, NMLS #2289 | The Wood Group of Fairway, 127 Lake Rd Ste 300, Belton, TX 76513 | Equal Housing Opportunity. This is not a commitment to lend. All loans are subject to credit approval and program guidelines, and approval, rates, and program availability are not guaranteed. Product availability varies. This article is general information, not legal or tax advice; consult an attorney about your situation. Examples are hypothetical. Not affiliated with or endorsed by the Texas Finance Commission, the OCCC, the Texas Department of Savings and Mortgage Lending, the CFPB, or any government agency.