The Texas 80% Home Equity Rule: What You Can Actually Borrow

Published October 10, 2026. Updated October 10, 2026. The rules below were read that day from Texas Constitution Article XVI, Section 50, on statutes.capitol.texas.gov.

Equity, in the everyday sense, is what the home is worth minus what you owe. Texas does not let you borrow all of that difference on a home-equity loan. Article XVI, Section 50 of the Texas Constitution protects a homestead from forced sale except for a short list of debts. One of those debts, Section 50(a)(6), is the extension of credit people mean when they say home-equity loan, cash-out refinance, or home-equity line of credit. Paragraph (B) of that subdivision is the 80 percent rule.

This page is not legal or lending advice. Title companies and lenders apply the constitution to a specific file. Read Section 50 before you sign, and ask a lawyer if the loan does something this summary does not cover.

The sentence that sets the cap

Section 50(a)(6)(B) says the extension of credit must be of a principal amount that, when added to the outstanding principal balances of all other indebtedness secured by valid recorded liens against the homestead, does not exceed 80 percent of the fair market value of the homestead on the date the extension of credit is made. Three pieces of that sentence do the work. The new loan’s principal counts. Other liens’ principal balances count. The value is fair market value on the closing date, not a number from last year.

Section 50(a)(6)(Q)(ix) requires the owner and the lender to sign a written acknowledgment of that fair market value on the date of the extension. The cap is measured against the value in that acknowledgment. A lender may still lend less than the constitution allows.

A home-equity line of credit is still a Section 50(a)(6) loan. Section 50(a)(6)(F) says the loan cannot be an open-end account unless it is a home-equity line of credit, and Section 50(t) defines that line. Section 50(t)(5) is specific about the 80 percent test: the maximum principal amount that may be extended under the account, added to the other homestead debt outstanding on the date the line is established, cannot exceed the amount in Section 50(a)(6)(B). The credit limit counts, not only the first check you draw. Section 50(t)(2) also says any single debit or advance is not less than $4,000. Section 50(t)(4) says the fees described in Section 50(a)(6)(E) are charged only when the line is established, not on later draws.

What the cap does not cover

Purchase money is Section 50(a)(1), a different exception from forced sale. The 80 percent words are inside Section 50(a)(6). A mortgage you used to buy the house can be above 80 percent of value. The same is true of the other debts listed in Section 50(a)(2) through (a)(5) and (a)(8), including taxes on the homestead, an owelty of partition, a refinance of an existing permitted lien, work and material for improvements that meet the statute’s contract rules, and the conversion of a manufactured-home lien.

They still count if you later take out a home-equity loan. Section 50(a)(6)(B) adds “all other indebtedness secured by valid encumbrances of record.” A purchase mortgage that is still on the title reduces the room for the new equity loan. Section 50(a)(6)(K) allows that. It says the equity loan must be the only debt on the homestead unless the other debt was made for a purpose in Sections 50(a)(1) through (a)(5) or Section 50(a)(8). A purchase mortgage can stay. A random second lien that is not one of those purposes cannot sit beside a new equity loan.

Cash-out is where people get surprised. Section 50(e) says a refinance of debt secured by the homestead under Sections 50(a)(1) through (a)(5) that includes an advance of additional funds cannot be a valid homestead lien unless the refinance is itself a Section 50(a)(6) loan, or the additional funds are only reasonable costs necessary to refinance, or they are for taxes, an owelty, or improvements under the subsections named there. Taking cash out of a purchase mortgage generally turns the new loan into a Section 50(a)(6) loan, and the 80 percent cap applies on the day that new loan is made.

A worked example

These figures are arithmetic from Section 50(a)(6)(B), not a lender quote or an appraisal.

The owner and the lender acknowledge fair market value of $400,000. Eighty percent of that value is $320,000. The only other recorded lien is a purchase mortgage with an outstanding principal balance of $250,000. The new Section 50(a)(6) principal, plus $250,000, cannot exceed $320,000. The most the new equity loan or line can be is $70,000. Everyday equity is $400,000 minus $250,000, or $150,000. The constitutional borrowing room is the smaller number, $70,000.

Change only the mortgage balance. If the outstanding principal is $330,000, that balance is already above $320,000. Section 50(a)(6)(B) leaves no room for a new equity loan or a new line. The purchase mortgage itself can remain, because it is a Section 50(a)(1) debt. What you cannot do is add a Section 50(a)(6) loan on top of it.

The same arithmetic is what the Texas home equity calculator does. It multiplies the value you enter by 80 percent, then subtracts the mortgage balance you enter. Put in the value that will be acknowledged and every lien balance that Section 50(a)(6)(B) counts. If you omit a second lien, the calculator will show more room than the constitution allows.

Other Section 50(a)(6) limits that change the loan

The 80 percent cap is one paragraph in a long list. Section 50(a)(6)(E) says that, aside from interest and bona fide discount points used to buy down the rate, fees to originate, evaluate, maintain, record, insure, or service the loan cannot exceed, in the aggregate, two percent of the original principal. The two percent does not include a third-party appraisal, a survey by a state-registered or licensed surveyor, the state base premium for a mortgagee title policy with endorsements, or a title examination report if it costs less than the state base premium for a mortgagee policy without endorsements. On the $70,000 example, two percent of original principal is $1,400. That is the constitutional fee cap, not a statement of what a lender will charge, and it does not include the excluded third-party items.

Section 50(a)(6)(C) says the loan is without recourse for personal liability against each owner and the spouse of each owner, unless the owner or spouse got the loan by actual fraud. Section 50(a)(6)(D) says the lien may be foreclosed only by a court order. Section 50(a)(6)(H) says the loan is not secured by any real or personal property other than the homestead. Section 50(a)(6)(Q)(viii) lets the owner and any spouse rescind within three days after the extension of credit is made, without penalty or charge.

Closing dates are in Section 50(a)(6)(M). The loan is not closed before the 12th day after the later of the date the owner submits the application or the date the lender provides the notice in Section 50(g). That notice is a separate instrument, and the constitution sets out its text. The loan is also not closed before one business day after you receive a copy of the application, if you did not already have it, and a final itemized disclosure of the actual fees, points, interest, costs, and charges. A bona fide emergency, with your written consent, can allow that disclosure on the day of closing. And the loan is not closed before the first anniversary of any other Section 50(a)(6) loan on the same homestead, unless you request an earlier closing on oath because the president or the governor has declared an emergency for the area where the homestead is. Section 50(a)(6)(N) limits the place of closing to the office of the lender, an attorney, or a title company.

There is a second 80 percent test when you refinance an equity loan into a loan that is not a Section 50(a)(6) loan. Section 50(f)(2) allows that refinance only if several conditions are met. One of them, paragraph (C), repeats the 80 percent cap on the refinance date. Another, paragraph (A), says the refinance is not closed before the first anniversary of the equity loan. Paragraph (D) requires a separate written notice, given not later than the third business day after you apply and at least 12 days before closing, warning that a non-equity refinance drops the court-order foreclosure rule and the ban on personal liability. Section 50(f-1) treats a refinance that meets Section 50(f)(2) as a Section 50(a)(4) lien.

Who interprets the fine print

Section 50(u) lets the legislature delegate interpretation of subsections (a)(5) through (a)(7), (e) through (p), and (t). An act that matches an agency or appellate interpretation in effect at the time does not violate those provisions. The agency text is Title 7, Chapter 153, of the Texas Administrative Code. The 80 percent figure above is Section 50(a)(6)(B).

Frequently asked questions

Use the calculator

Open the home equity calculator and enter the acknowledged value and the remaining mortgage principal. The 80 percent line is the room left for a home-equity loan, a HELOC limit, or a cash-out refinance under Section 50(a)(6). It is not the room left on a purchase mortgage. The constitutional cap used by the calculator is recorded on the data sources page.

Sources

Read October 10, 2026, from the constitution text. The dollar example is arithmetic from Section 50(a)(6)(B), not a market statistic.

• Texas Constitution, Article XVI — Section 50, including the 80 percent cap in Section 50(a)(6)(B), the two percent fee cap in Section 50(a)(6)(E), the 12-day closing rule in Section 50(a)(6)(M), the HELOC rules in Section 50(t), the refinance rules in Section 50(e) and Section 50(f), and agency interpretations under Section 50(u).
• Title 7, Texas Administrative Code, Chapter 153 — interpretations of Section 50 by the agencies the legislature designated. Not quoted in this article. The cap used here is the constitutional text.