HELOC in Texas

What a Texas HELOC actually is

A HELOC is a revolving line of credit secured by a second lien on your home. Instead of receiving one lump sum, you get an approved limit you can draw from, repay, and draw again during the draw period. You pay interest only on the balance you're actually using — which is why homeowners use a HELOC for staged renovations, standby liquidity, or bridging a purchase before a sale closes.

In Texas, home equity lines are authorized under Section 50(t) of the state constitution and inherit most of the borrower protections attached to closed-end home equity loans under 50(a)(6). That means stricter limits than most states — and stronger homestead protection.

The 80% rule: how much you can actually borrow

Texas caps total mortgage debt on your primary homestead at 80% of appraised value, combined across every lien. Critically, lenders count your entire approved HELOC limit against that cap — not just the balance you draw.

Illustrative examples only. Your actual line depends on appraised value, credit, income, and program guidelines.

Texas HELOC rules you have to plan around

• 80% combined loan-to-value cap. No exceptions on homestead property, and the full line counts.
• One home equity transaction per 12 months. A new 50(t) line can't close within a year of your last home equity closing.
• 12-day cooling-off period. Closing can't happen until at least 12 days after you receive the required Texas notice.
• 3-day right of rescission. You can cancel within three business days after closing.
• Primary homestead only. Second homes and rentals use different programs.
• No prepayment penalties. Texas prohibits them on home equity products.
• Draw limits. Texas restricts advances to no more than once per month, with a minimum advance amount set by the lender.

Draw period vs. repayment period

Most Texas HELOCs run a 10-year draw period followed by a 15- or 20-year repayment period. During the draw, payments are often interest-only on the outstanding balance. When the draw ends, the line closes to new advances and the balance amortizes — which can be a meaningful payment jump if you've carried a large balance. How the index-plus-margin structure behind all of this works is covered in the Texas HELOC rates guide.

Rates on a HELOC are typically variable, tied to an index plus a margin, so your payment moves with the market. If a fixed payment matters more than flexibility, a closed-end second lien or a cash-out refinance is usually the better structure.

HELOC vs. home equity loan vs. cash-out refinance

A deeper breakdown of the state's home equity framework lives in the Texas home equity guide, refinance math is covered in the Texas cash-out refinance guide, and the full head-to-head — including which structure wins at which rate gap — is in the HELOC vs. cash-out refinance comparison.

How to qualify for a Texas HELOC

• Credit: 680+ for best pricing; some programs consider the 640s with a smaller line.
• Equity: Real appraised equity above the 80% CLTV line after the new limit is counted.
• Debt-to-income: Generally 43–50%, calculated using a qualifying payment on the full line.
• Income documentation: W-2s and pay stubs, or two years of returns if self-employed.
• Seasoning: 12 months since your last Texas home equity closing on the property.
• Occupancy: Texas primary residence, designated as your homestead.

Every requirement above — credit tiers, documentation, and the 12-month seasoning rule — is detailed in the Texas HELOC requirements guide. Run your own numbers with the HELOC calculator.

When a HELOC is the right call — and when it isn't

Strong fit: you're holding a first mortgage in the 2–4% range, you need access to capital in stages, and you want to avoid paying interest on money you haven't spent yet. Renovation projects, tuition timing, and investment-property down payments all fit this pattern.

Weaker fit: you need every dollar today and want payment certainty, you're near the 80% ceiling already, or a rising index would strain your budget. In those cases a fixed second lien or a full refinance is the safer structure.

Frequently asked questions