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Texas HELOC Rules: Constitution Article XVI Section 50(a)(6)
Texas is the only US state that regulates home equity lending at the constitutional level. The restrictions in Article XVI Section 50(a)(6) of the Texas Constitution make Texas HELOCs structurally more conservative than HELOCs in any other state. Borrowers planning to use a Texas HELOC should understand these rules before applying.
Texas HELOC quick-reference
- Maximum CLTV: 80% (constitutional, no exceptions)
- Maximum fees: 2% of loan principal (excluding appraisal, title, recording)
- Waiting period: 12 calendar days from application to closing
- Closing location: lender, title, or attorney office only (not at home)
- One home equity loan at a time per homestead
- 3-day right of rescission after closing
Why Texas is different
Texas historically banned home equity lending entirely until 1997, when a constitutional amendment created the framework that still governs the product today. The 1997 amendment (and subsequent modifications in 2003, 2017, and later) reflected Texas's long tradition of homestead protection (dating to the Republic of Texas era) and a deliberate policy choice to permit home equity borrowing only under tightly-controlled conditions. The result is a constitutional framework that protects Texas homeowners from many of the predatory home equity practices that occurred in other states in the 2003 to 2007 housing boom, at the cost of less product flexibility than in states where home equity lending is governed by state statute or regulation rather than constitutional text.
The full text of Article XVI Section 50(a)(6) is available through the Texas Statutes online. The provisions are detailed and technical, with multiple subsections covering disclosure requirements, closing-location rules, fee caps, and rescission rights. The Texas Department of Banking and the Office of Consumer Credit Commissioner provide regulatory guidance and compliance interpretations that further define lender obligations.
For borrowers, the practical impact of Section 50(a)(6) is mostly positive: lower fees, slower timeline (less rushed decision-making), tighter CLTV (lower default risk), and clearer disclosure requirements. The trade-off is reduced product flexibility: no high-CLTV product variants, no rate-buy-down options, slower closing timelines, and a one-at-a-time rule that prevents stacking multiple home equity facilities. Texas HELOC borrowers should not expect to use the same product mechanics as borrowers in other states; the Texas-specific rules genuinely differ.
The 80% constitutional CLTV cap
The 80% combined loan-to-value cap is the most consequential Texas-specific restriction. In other US states, lenders may write HELOCs up to 85%, 90%, or even 95% CLTV with higher rate margins. In Texas, the 80% cap is absolute and cannot be exceeded by any lender under any circumstances. The cap applies to the sum of the first-mortgage balance plus the maximum HELOC credit limit (not the drawn balance). A Texas borrower with a $400,000 home and a $200,000 first mortgage can access a maximum HELOC limit of $120,000, regardless of credit profile or willingness to pay higher rates.
The constitutional cap creates a structurally different lending market in Texas. Lenders that specialize in high-CLTV products in other states (Figure at 95%, Aven at 95%) cannot offer those products to Texas homestead borrowers. The Texas HELOC market is dominated by traditional banks and credit unions operating at or below the 80% cap, with pricing typically slightly more conservative than in other states because the entire market sits at the lowest CLTV tier.
One practical implication: Texas borrowers needing more than 80% CLTV access to equity have fewer options than borrowers in other states. The alternative paths include: cash-out refinance (which can reach 80% LTV on the first mortgage itself, not constrained by Section 50(a)(6) the same way), reverse mortgage for borrowers over 62 (separate regulatory regime), Hometap or Unison shared-equity products (different legal structure, not classified as home equity loans), or unsecured personal loans. None of these are perfect substitutes for a high-CLTV HELOC, and each carries its own trade-offs.
The 2% fee cap and what it covers
Section 50(a)(6) caps the total fees and charges on a Texas home equity loan or HELOC at 2% of the principal amount. The cap excludes certain specific items: bona fide discount points (subject to limits on origination), appraisal fees paid to third parties, property survey costs, title insurance premiums and related title charges, recording fees, and notary fees. The 2% cap therefore covers items like origination fee, processing fee, lender attorney fee, document preparation, and similar lender-controlled charges.
On a $150,000 HELOC, the 2% cap limits lender-controlled fees to $3,000. Add typical excluded costs (appraisal $500, title insurance $1,200, survey $400, recording $200, notary $100) and total out-of-pocket closing costs for a Texas HELOC come in around $5,400 at the cap. Many Texas lenders come in well below the cap to remain competitive. Bank of America, US Bank, and large credit unions often absorb most of these costs entirely for qualified Texas borrowers.
The fee cap protects Texas borrowers from the higher closing costs that can apply in other states (where origination fees of 1% to 3% are common and not capped). The trade-off is that Texas lenders cannot offer rate-buy-down options that work by charging higher upfront fees in exchange for a lower ongoing rate, because the buy-down fees would exceed the 2% cap. Texas borrowers seeking the lowest possible ongoing rate must accept the lender's standard published rate; they cannot trade upfront cash for a lower margin.
The 12-day waiting period and closing process
The 12-day waiting period is a mandatory minimum between application date and closing date. The clock starts on the application date (after the borrower has received the Texas-specific home equity loan disclosure forms) and runs for 12 calendar days regardless of how quickly the lender could otherwise close. Day 13 is the earliest possible closing date. The waiting period is in addition to the federal 3-day Reg Z rescission period that applies after closing, and it operates as a pre-closing reflection period during which the borrower can withdraw without penalty.
Closing on a Texas home equity loan or HELOC must occur at one of three location types: the office of the lender, the office of a title company, or the office of an attorney. Closing at the borrower's home is prohibited by Section 50(a)(6), with the express purpose of preventing high-pressure on-site signing tactics. Mobile notary closings are permitted only when they occur at one of the three allowed location types (typically a title company office). Remote online notarization (RON) has been adopted in Texas under specific rules, with eligibility for home equity loans requiring additional procedural safeguards.
The 12-day waiting period plus the closing-location requirements extend Texas HELOC timelines beyond what borrowers in other states typically experience. A digital-lender HELOC that closes in 5 days in Florida or California will take a minimum of 13 days in Texas. A bank HELOC that closes in 25 days in Ohio will take 30 to 45 days in Texas. Borrowers with contractor start dates or other timing constraints should plan for the Texas-specific timeline rather than assuming the marketed lender timelines apply.
Frequently asked questions
What is Texas Constitution Article XVI Section 50(a)(6)?
This is the Texas constitutional provision that governs home equity lending in Texas. It imposes strict limits on home equity loans and HELOCs that do not apply in any other US state: maximum 80% CLTV (hard constitutional cap), maximum 2% in fees (excluding certain costs), mandatory 12-day waiting period between application and closing, one home equity loan at a time per property, no closing at the property itself (must be at lender/title office or attorney's office), and a 3-day right of rescission after closing.
Is the Texas 80% CLTV cap really a hard limit?
Yes. The 80% cap is in the Texas Constitution itself, not just a lender preference. Unlike other states where the 80% CLTV is a typical underwriting cap that some lenders exceed, in Texas no lender can write a home equity loan or HELOC above 80% CLTV regardless of the borrower's credit profile or willingness to pay higher rates. The constitutional cap is the same for HELOC and home equity loan products.
What is the 2% fee cap?
Section 50(a)(6) caps fees and charges on a Texas home equity loan or HELOC at 2% of the loan principal, excluding certain specific items (appraisal, title insurance, surveys, recording fees). The fee cap protects Texas borrowers from high origination costs but also limits the lender's ability to offer rate-buy-down options that are common in other states.
Why is there a 12-day waiting period?
The Texas Constitution requires a minimum 12 calendar days between the date the borrower signs the home equity loan application and the date of closing. The waiting period gives borrowers time to reconsider the transaction without lender pressure. The 12-day clock starts on the application date (after the borrower has received required disclosures); closing cannot happen before day 13.
Can I have multiple home equity loans in Texas?
No. Section 50(a)(6) restricts each Texas homestead to one home equity loan at a time. A borrower with an existing Texas home equity loan or HELOC must pay it off in full before originating a new one. This rule prevents stacking multiple second liens against a Texas homestead, which combined with the 80% CLTV cap keeps Texas home equity borrowing structurally more conservative than in other states.
Are there any other Texas-specific HELOC rules?
Several. Closing must occur at the lender's office, title company office, or an attorney's office (not at the borrower's home, to prevent high-pressure on-site signing). The borrower has a 3-day right of rescission after closing under both federal TILA and Texas-specific provisions. The Texas Office of Consumer Credit Commissioner regulates HELOC mechanics. There are constitutional disclosure requirements specific to Texas (the 12-day notice itself, and several other consumer-disclosure forms).