Can You Refinance Out of a Texas Cash-Out Loan? The 50(f)(2) Rules
Yes. Since January 1, 2018, the Texas Constitution lets you refinance a Texas home equity (50(a)(6)) loan into a regular rate-and-term (§50(a)(4)) loan under Section 50(f)(2), if all four conditions are met:
- One year: the refinance can’t close before the first anniversary of your home equity loan’s closing.
- No new cash: the new loan can only pay off existing home-secured debt plus the lender’s actual required costs and reserves.
- 80% limit: the new loan plus all other debt on the home can’t exceed 80% of the home’s fair market value.
- Written notice: your lender must give you a required notice no later than the 3rd business day after you apply and at least 12 days before closing.
The trade-off: the new loan no longer has home equity protections, including foreclosure only by court order and no personal liability.
Reviewed by Dustin Edwards, Principal, NMLS 577050 | Last updated October 19, 2026
I’ve worked in mortgage lending for 22 years. Homeowners who took cash out of their Texas home often ask whether they can refinance out of it later. If you’re still learning how the original loan works, start with our guide to Texas cash-out refinance rules.
The short answer: 4 conditions for a 50(f)(2) refinance
| Condition | What it means for you | Source |
|---|---|---|
| One-year wait | The refinance can’t close before the first anniversary of the date your home equity loan closed (§50(a)(6)(M)(iii), with a limited emergency exception). | Tex. Const. art. XVI §50(f)(2)(A); 7 TAC §153.45(1) |
| No new cash | The only money the lender can advance is to pay off debts described in §50(a)(1)–(a)(7) and the lender’s actual required costs and reserves. | §50(f)(2)(B); 7 TAC §153.45(2) |
| 80% limit | The new loan plus all other recorded debt on the homestead can’t exceed 80% of fair market value on the date of the refinance. | §50(f)(2)(C); 7 TAC §153.45(3) |
| Required notice | A written notice on a separate document, no later than the 3rd business day after you apply and at least 12 days before closing. | §50(f)(2)(D); 7 TAC §153.45(4) |
If any one condition isn’t met, a 50(f)(2) refinance isn’t available. Your other path is refinancing into another 50(a)(6) home equity loan, which is allowed under §50(f)(1).
Why your loan is “stuck” as a home equity loan (and what changed in 2018)
Section 50(f) of the Texas Constitution says that once any part of your home debt is a 50(a)(6) loan, a refinance of that debt can only be secured by your homestead if it’s another home equity loan (or a reverse mortgage), or if it meets all of the 50(f)(2) conditions.
Before 2018, the second option didn’t exist. Once a loan was a home equity loan, refinancing generally meant another home equity loan, with all of its limits. Texas voters approved Proposition 2 in November 2017 (85th Legislature, SJR 60), and the 50(f)(2) option took effect January 1, 2018.
Under §50(f-1), a lien from a 50(f)(2) refinance is treated as a regular refinance lien under §50(a)(4). An affidavit signed by the owner or the owner’s spouse confirming the 50(f)(2) requirements were met conclusively establishes that.
Condition 1: the one-year wait
The refinance can’t close before the first anniversary of your home equity loan’s closing date. Texas regulators define the closing date of the refinance as the date you sign the loan agreement (7 TAC §153.45(1)).
In practice: find the closing date on your current home equity loan documents, and plan to sign the new loan no earlier than one year later. You can apply before the anniversary; only the signing date has to clear it (7 TAC §153.45(1)).
Condition 2: no new cash
A 50(f)(2) refinance can’t put new money in your pocket. The lender can only advance funds to:
- Refinance existing debts described in §50(a)(1)–(a)(7), such as your current home equity loan or a purchase-money first lien, and
- Cover the lender’s actual costs and reserves required to refinance the debt.
What counts as costs and reserves
Under 7 TAC §153.45(2), costs must be identifiable, actually required by the lender and within any limits that apply. Reserves, such as an escrow account for taxes and insurance, must also be actually required by the lender and comply with applicable law.
Bringing cash to closing to pay down the balance
Money you pay before or at closing (cash, check or wire) isn’t “advanced” by the lender, so it doesn’t break the no-new-cash rule (7 TAC §153.45(2)(C)). That matters for Condition 3: if you’re close to the 80% line, paying down principal at closing may be a way to qualify.
Condition 3: the 80% loan-to-value limit
The new loan, added to every other recorded debt on your homestead, can’t exceed 80% of the home’s fair market value on the date the refinance is made (§50(f)(2)(C)). Under 7 TAC §153.45(3), the new loan’s principal includes any financed closing charges.
Illustrative example
These round numbers are an example only, not a quote or a typical case.
- Home’s fair market value: $500,000
- 80% limit: $400,000
- Current home equity loan balance: $370,000
- Financed costs and reserves: $10,000
- New loan principal: $380,000, under the limit
If the same homeowner owed $395,000, the new loan plus financed costs would go over $400,000. They would need to bring cash to closing, pay costs out of pocket, or look at another 50(a)(6) loan instead.
Condition 4: the required notice
Your lender must give you a written notice on a separate document no later than the 3rd business day after you submit your application, and at least 12 days before closing (§50(f)(2)(D)). Under 7 TAC §153.45(4), an application given to the lender’s agent counts as an application to the lender, and an application can be oral or electronic.
The notice is written into the Constitution. Its key lines say:
“YOUR EXISTING LOAN THAT YOU DESIRE TO REFINANCE IS A HOME EQUITY LOAN. YOU MAY HAVE THE OPTION TO REFINANCE YOUR HOME EQUITY LOAN AS EITHER A HOME EQUITY LOAN OR AS A NON-HOME EQUITY LOAN, IF OFFERED BY YOUR LENDER.”
“A NON-HOME EQUITY REFINANCED LOAN: (1) WILL PERMIT THE LENDER TO FORECLOSE WITHOUT A COURT ORDER; (2) WILL BE WITH RECOURSE FOR PERSONAL LIABILITY AGAINST YOU AND YOUR SPOUSE; AND (3) MAY ALSO CONTAIN OTHER TERMS OR CONDITIONS THAT MAY NOT BE PERMITTED IN A TRADITIONAL HOME EQUITY LOAN.”
“YOU MAY WISH TO ASK YOUR LENDER TO REFINANCE YOUR LOAN AS A HOME EQUITY LOAN. HOWEVER, A HOME EQUITY LOAN MAY HAVE A HIGHER INTEREST RATE AND CLOSING COSTS THAN A NON-HOME EQUITY LOAN.”
In plain English: you’re choosing between keeping the home equity protections or giving them up for a regular loan. The notice also says you should consider talking with an attorney of your choosing about those protections.
What you give up: court-ordered foreclosure and non-recourse
A Texas home equity loan comes with two big protections under §50(a)(6):
- Court-ordered foreclosure only. The lender must get a court order to foreclose (§50(a)(6)(D)).
- Non-recourse. You and your spouse aren’t personally liable for the debt, except in cases of actual fraud (§50(a)(6)(C)). The lender’s remedy is the home itself.
A 50(f)(2) refinance turns your loan into a regular refinance lien. As the required notice says, the lender can foreclose without a court order, and the loan carries personal liability for you and your spouse. Because §50(f-1) treats it as an (a)(4) refinance lien, the 50(a)(6) requirements, such as the 2% fee cap, don’t govern it; federal lending rules still apply.
Whether that trade is worth it depends on your situation. I’d encourage you to read the notice carefully and talk to an attorney if you have questions about what you’re waiving.
50(f)(2) refinance vs. a new 50(a)(6) loan: which fits?
| 50(f)(2) refinance | New 50(a)(6) home equity loan | |
|---|---|---|
| Cash out | No new cash | Cash out allowed |
| Loan-to-value | Up to 80%, all homestead debt | Up to 80%, all homestead debt |
| Waiting period | 1 year after the home equity loan closed | Generally 1 year after the last 50(a)(6) loan closed |
| Foreclosure | No court order required | Court order required |
| Personal liability | Recourse | Non-recourse (except actual fraud) |
| 2% fee cap | Doesn’t apply | Applies |
| Pricing | Varies by lender | The notice says it “may have a higher interest rate and closing costs” |
Product availability and pricing vary by lender. Not every lender offers both options.
Is a 50(f)(2) refinance right for you?
It may be worth exploring if:
- Your home equity loan closed more than a year ago
- You don’t need any new cash from the refinance
- All your home debt, including financed costs, will be at or under 80% of your home’s value
- You understand you’d give up court-ordered foreclosure and non-recourse protections
- You’ve compared it against refinancing into another home equity loan
If you need more cash, another 50(a)(6) loan is the route to look at. See our cash-out refinance options.
How a mortgage broker helps
Because pricing on 50(f)(2) and 50(a)(6) loans varies by lender, comparing both side by side matters. At CapFi Lending, we work with 50 to 60 bank and non-bank lenders, so we can show you how each option is priced across lenders before you choose. Read more about why Austin borrowers use a mortgage broker. We help homeowners across Austin, Round Rock and Cedar Park.
FAQ
Can I refinance a Texas home equity loan into a regular mortgage?
Yes, if all four Section 50(f)(2) conditions are met: one year since closing, no new cash, 80% loan-to-value and the required notice.
How long must I wait to refinance a Texas cash-out loan?
At least until the first anniversary of the home equity loan’s closing date.
Can I take cash out in a 50(f)(2) refinance?
No. The lender can only pay off existing home-secured debt plus its actual required costs and reserves.
What is the LTV limit for a 50(f)(2) refinance?
80% of the home’s fair market value, counting all debt secured by the home.
What notice do I get?
A required notice on a separate document, no later than the 3rd business day after you apply and at least 12 days before closing.
What do I give up?
Court-ordered foreclosure and non-recourse protection. The new loan allows foreclosure without a court order and carries personal liability.
Does my spouse need to be involved?
The §50(f-1) affidavit can be signed by the owner or the owner’s spouse. Signing requirements for your loan can vary, so confirm them with your lender or title company.
Ready to compare your options?
Have a Texas home equity loan and want to look at a refinance? CapFi compares 50(f)(2) and 50(a)(6) options across 50 to 60 lenders. Call (512) 593-1336 (by appointment only), email [info@capfilending.com](mailto:info@capfilending.com), or apply online.
Sources: Texas Constitution, Article XVI, §50 · 7 Tex. Admin. Code §153.45 · 85(R) SJR 60 · Texas Finance Commission · OCCC
Disclosures: CapFi Lending, NMLS #1692019. Dustin Edwards, NMLS #577050. 2617 Willow St Unit 1, Austin, TX 78702 (by appointment only). (512) 593-1336. Equal Housing Opportunity. Verify licensing at NMLS Consumer Access. See our licensing page. This article is for educational purposes only and isn’t legal or tax advice, a commitment to lend or an offer of credit. Product availability and pricing vary by lender. All loans are subject to credit approval, underwriting and property eligibility. Last reviewed October 19, 2026.
