For more details on our Texas Cash Out Refinance program please visit us at: https://hurstlending.com/conventional-loans/cash-out-refinance-texas/
Texas Cash-Out Refinance: An Overview
A Texas cash-out refinance is a mortgage refinancing option that allows homeowners to borrow more than they owe on their existing mortgage, using their home’s equity. The difference between the new loan and the remaining balance on the original mortgage is given to the homeowner as cash, which can be used for various purposes, such as home improvement, debt consolidation, or investing in other properties.
Texas Cash-Out Refinance Laws
In Texas, cash-out refinance laws are unique compared to other states. The Texas Constitution, under Section 50(a)(6), has strict provisions regarding cash-out refinance loans, which are designed to protect homeowners from over-leveraging their properties. Key points to remember include:
- Loan-to-Value (LTV) Limit: In Texas, the maximum LTV ratio for a cash-out refinance is 80%. This means that the total loan amount, including the cash taken out, cannot exceed 80% of the home’s fair market value.
- 12-Day Rule: Before closing on a Texas cash-out refinance loan, homeowners must receive a written notice outlining the terms and conditions, and they must wait at least 12 days after receiving this notice before signing any loan documents.
Factors Affecting Your Texas Cash-Out Refinance Amount
Several factors can influence the amount you can receive through a cash-out refinance in Texas. Some of these factors include:
- Home Equity: The more equity you have in your home, the higher your potential cash-out refinance amount. To calculate your home equity, subtract your current mortgage balance from your home’s current market value.
- Home Appraisal: An appraisal is necessary for a cash-out refinance to determine your home’s current market value. A higher appraisal value increases the amount of cash you can potentially receive.
- Credit Score: A good credit score can help you secure a better interest rate on your cash-out refinance loan, which could impact the overall amount you receive.
- Debt-to-Income (DTI) Ratio: Lenders consider your DTI ratio, which compares your monthly debt payments to your monthly gross income, to determine if you can afford the new loan payments. A lower DTI ratio improves your chances of qualifying for a higher cash-out refinance amount.
Examples
To better illustrate how the cash-out refinance process works in Texas, let’s consider two examples:
Example 1: John’s home in Texas has a current market value of $400,000, and he has a remaining mortgage balance of $200,000. This means he has $200,000 in home equity. Since Texas allows a maximum LTV of 80%, John can potentially receive a cash-out refinance loan of up to $320,000 ($400,000 x 80%). After paying off his original mortgage of $200,000, he can access $120,000 in cash.
Example 2: Jane’s home in Texas is worth $600,000, and she has a remaining mortgage balance of $400,000. This means she has $200,000 in home equity. With the 80% LTV limit in Texas, Jane can potentially receive a cash-out refinance loan of up to $480,000 ($600,000 x 80%). After paying off her original mortgage of $400,000, she can access $80,000 in cash.
Conclusion
A cash-out refinance can be a valuable financial tool for Texas homeowners, offering an opportunity to access cash by leveraging their home equity. However, it’s essential to understand the unique Texas laws governing cash-out refinance loans, as well as the various factors affecting the amount you can receive.
At Hurst Lending, our team of experienced mortgage lenders is here to guide you through the cash-out refinance process in Texas. We are a Texas based lender and we understand the complexities of Texas cash-out refinance laws.
For more details on our Texas Cash Out Refinance Program lease visit: https://hurstlending.com/conventional-loans/cash-out-refinance-texas/
REFERENCES
Texas Constitution, Section 50(a)(6): https://statutes.capitol.texas.gov
Consumer Financial Protection Bureau – Cash-Out Refinance: https://www.consumerfinance.gov
Freddie Mac – Cash-Out Refinance: http://www.freddiemac.com/
Experian – How to Get a Cash-Out Refinance: https://www.experian.com/
In addition to being one of the founders of Hurst Lending, I am also an attorney and real estate investor. I have a portfolio of residential and commercial properties. I have been helping our customers buy, sell, and refinance their homes since 2000. Our suite of industry-leading offers helps solve many common situations faced by homeowners and real estate investors. Have you ever experienced the frustration of trying to buy before you sell; Losing your dream home in a bidding war; Trying to obtain a No-Seasoning Cash-out loan; Being unable to get a mortgage because your new or old house needs modest repairs; or simply because you prefer using our funds to close quickly without having to liquidate other investments? Our Industry-leading suite of short-term loans solves these issues. We also offer a suite of real estate investor loan products and a full suite of conventional, VA, FHA, construction and traditional home loans.
Please feel free to contact me directly if I can help provide a loan for your next purchase or refinance, or even if you just want advice on how to get started or expand your real estate investing activities.
Scott E. Bialek
Co-Founder, Hurst Lending
sbialek@hurstlending.com
*Disclaimer: This article is intended for informational purposes only and does not constitute legal, financial, or professional advice. Consult with a licensed professional before making any financial or real estate decisions.
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