What you need to know about Texas cash-out mortgages

By
Mortgage and Lending with Cornerstone First Mortgage, NMLS #173855 NMLS 217454

What you need to know about Texas cash-out refinances

By utilizing a Texas cash-out refinance homeowners can tap into their home's equity and very low-interest rates. Because Texas has unique home equity cash-out refinance laws, we have frequently asked questions regarding Texas home equity mortgages.

In recent years many Texas homeowners have elected to pay cash for their home purchases. This is due in part to the very competitive nature of the Texas real estate market whereby paying cash could help one secure the home they wanted. Home values have risen greatly and now homeowner’s equity is rising as well. While having a home paid for is truly a great feeling it may not be the best use of one’s financial resources.

To receive your free customized Texas cash-out refinance quote please give the Richard Woodward Mortgage Team a call today at 214-945-1066 or complete an online application now.

Answers to frequently asked questions about Texas Cash Out
Refinance Questions

I want to refinance and get some cash but the loan officer says the max he can lend is 80% in Texas. Why is that?

This restrictive ruling that limits the loan to value to 80% is actually part of the Texas Constitution (see section 50 (a) (6) article XVI). County records identify the fact that the home has had a home equity lien filed against it. This will be the case until the current Home Equity loan is completely paid off. So if you are in the process of refinancing your current loan make sure you tell your loan officer if you have ever completed a home equity loan or cash-out refinance.

Current law limits Texas homeowners to only one home-equity loan at a time. What is the maximum loan to value on a cashout loan? In the state of Texas cash-out and home-equity loans for homestead, properties are restricted by the Texas Constitution (see section 50 (a) (6) article XVI). This article restricts cash-out loans to a maximum loan-to-value or combined loan to value (LTV) of 80%. In other words, if your home is worth $500,000 the maximum allowed loan on the home would be $400,000.

Are there any restrictions on what I can use the money from a Texas cashout?

Debt Consolidation loans can help eliminate stress

Debt Consolidation loans can help eliminate stress

NO. You can use the funds for whatever purpose you desire. Many Texas homeowners use a Texas cash-out refinance to consolidate debt of higher interest rate credit card debt, pay for college education expenses, make a down payment on investment property, or just invest the money into other resources. How can Service First Mortgage roll all my bills into one monthly payment? If you have equity in your home your loan officer can show you how you can pay off your outstanding loans and credit card balances and roll them into one low monthly payment. Not only does this alleviate the hassle of having to pay individual creditors but you most likely will be lowering the interest rate charged by your creditors. Most credit card companies charge between 8 to 21 percent interest on their loan balances. Compare that to a home equity loan in the single digits and the savings are impressive. In most circumstances, your new Texas cash-out mortgage interest may be tax-deductible. Contact your accountant or CPA to confirm this. Ask your loan officer about our home consolidation loan and start saving money today.

Recent changes that improve this loan.

In November 2017, Texas voters chose to amend the Texas Constitution which changed the rules related to home equity lending and made it friendlier for borrowers today. Here are four reasons why:

You can refinance your previous cash-out loan without taking cash out; you can have a conventional rate-and-term refi if desired (but still must wait at least one year from date of closing); “the new law will let homeowners take advantage of historically low rates”; plus there is more flexibility than ever before with borrowing money on their own property!  When you refinance to a rate and term conventional loan, you will be limited to 80% of the current home value.  However, if you refinance again, you will not be limited to 80%.  This is good news for those interested in big renovation projects or those looking for an ex-spouse equity buyout.  Read more about equity buy-out options here. 

Allowable Loan fees have been lowered to 2% but those allowable fees have changed.

Before the change, all fees charged to the borrower were limited to 3% of the loan amount.  That made securing a cash-out mortgage for small loans very difficult.  Now, the fee limit does not include appraisal and survey costs, title insurance premiums, or discount points used for buying down your interest rate.

Agricultural homesteads are now eligible.

Cash-out loans were not available on properties with agricultural exemptions, that has changed now.

The list of eligible lenders has expanded.

Subsection (a)(6)(P)(i) states that subsidiaries of the banks, savings and loan associations, savings banks, and credit unions doing business under the laws of Texas  of the United States also may make home equity loans. The subsection (a)(6)(P)(vi) replaces the term “broker” with “banker” or “mortgage company”, clarifying that licensed mortgage companies and registered mortgage bankers may make home equity loans.

The 50% ceiling on additional advances was repealed

Repealing the 50% ceiling on additional advances under Home Equity Lines of Credit or HELOCs – With this SJR60, you can now take out more money from your home equity line if it’s worth less than half of what is owed. However, even though subsection (a)(6) has been repealed with this new law change, there are still caps for how much a person can get at 80%.

12 Day Notice Disclosure

One of the provisions of a Texas Cash-out refinance is that all borrowers must receive a 12-day disclosure. That disclosure spells out all of the rules involving Texas cash-out loan.  This disclosure must be received and signed at least 12 days before closing.

3 Day right of rescission.

The right of rescission, created by the Federal Truth in Lending Act, gives homeowners the absolute right to cancel a home equity loan, or line of credit, until midnight of the third day after closing, excluding federal holidays and Sundays.

I’ve been told that the lender will pay all fees on my cash out. Is that true?

YES and NO. First off, in Texas, this was true normally only for subprime cash-out deals. Since there really aren’t any subprime mortgages anymore those types of loans are pretty much gone. However, if the amount of funds you need is very small, a home equity line of credit may be better suited. A line of credit generally has very few fees. Secondly, new lending guidelines imposed by the Consumer Finance Protection Bureau make it very difficult for lenders to pay your fees. In addition, the fees for your title policy, appraisal, title company fees, and the lender fees are all fees that someone has to pay. Lenders may agree to pay all or a portion of the fees, but be aware that if the lender pays such fees, the cost is usually passed on to the borrower at a higher interest rate to compensate. This may not be the best option for you. Your loan officer will provide you options and you can determine which one best suits your needs.

What should I know about my cash-out loan?

The state of Texas is unique when it comes to cash out or home-equity loans. Unlike most states, Texas allows a homeowner to only borrower up to 80% of their home’s value. This is meant to protect the home owner’s equity. In addition, all Texas cash-out loans require that you cannot close until 12 days have passed since you made the application. Furthermore, after closing of your home equity loan, the Texas constitution requires a 3-day rescission period in which you may terminate the loan without obligation. Another very unique nuance to the Texas Cash out home equity loan is that you can only have one cash-out loan at a time and that once you have taken out a cash-out loan all subsequent loans used to refinance that loan must be structured as a cash-out loan. Ask your loan officer for a copy of “the 12-day letter” and an explanation of your rights.

Are you ready to start your process now? Just call the team today at (214) 945-1066. The Richard
Woodward Mortgage Team will prepare for you a customized quote at no charge and no obligation.
Our goal is to make sure you have all the right tools.

Richard Woodward

NMLS 217454

Your Local, Direct, 5 Star Rated Mortgage Lender, Specialty Lending Manager

Office:  (214) 945-1066

 www.mortgageprosus.com

Service First Mortgage  NMLS 166487

6800 Weiskopf Ave #200, McKinney, TX 75070

                                           

Licensed by the Texas Department of Savings and Mortgage Lending (SML) Mortgage Banker Registration, AZ 0924237, CO, FL MLD1342, KY MC358087, OH SM.501988.000, OK ML01483. Service First Mortgage is an Equal Housing Lender. This is not an offer of credit or commitment to lend. Loans are subject to buyer and property qualification. Rates and fees are subject to change without notice.

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