Texas Mortgage Refinance Law – Home Equity or Not?

Texas Home Equity 50(a)(6) mortgages on a Texas homesteads have dozens of restrictions. One common question about refinances I get from less experienced loan underwriters is, When does the “once a home equity, always a home equity” rule affect other financing on the homestead property?

The answer is pretty simple. Section 50(f) of Article 16 of the Texas Constitution states:
“A refinance of debt secured by the homestead, any portion of which is an extension of credit described by Subsection (a)(6) of this section, may not be secured by a valid lien against the homestead unless the refinance of the debt is an extension of credit described by Subsection (a)(6) or (a)(7) of this section.”

If a 50(a)(6) home equity mortgage is refinanced alone or together with another mortgage, the new loan must be a 50(a)(6) home equity mortgage.

If one or more existing mortgages that are not a 50(a)(6) home equity mortgage are refinanced, that is permitted under 50(a)(4), and there is no need to follow the 50(a)(6) home equity mortgage rules. This is the case even though a 50(a)(6) home equity mortgage exists against the property at the time (as long as it is not paid off with loan proceeds).

Richard Duncan

About Richard Duncan

I have been a Texas real estate, title, and mortgage attorney since 1985. If you have title or closing issues in Texas, let's discuss them. Posts here are not intended to be legal advice - they are only topics for discussion that may be addressed by your attorney.
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