Home Equity Loans

 

Home Equity Loans are also known as “cash-out refinance” loans, and in Texas they are also referred to as “Texas cash-outs” or a “Texas A(6)”, referring to the article of the law that governs mortgages in Texas.  In Texas, there are many onerous rules that govern a home equity loan on a primary resdence and make it unique to other states.  But the two main rules that you really have to watch out for are:

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you are limited to 80% of the value of the home when you are pulling cash out of a primary residence. If either your first or second lien is designated an “A(6)” loan, the sum total of all loans on that property cannot be above 80% of the value of the home at the time the home equity loan was taken out.

- your closing costs are limited to 3% of the loan amount when you are pulling cash out of a primary residence. Closing costs refer to any and all non-recurring charges that you would not incur if you did not refinance. The only exception to this are any discount points you pay to reduce your interest rate – those are not subject to the 3% rule.