If you're a Texas homeowner who would like to access the cash that's just sitting in your house, you're not alone. You can find a cash-out refinance in Texas to set you free from debt slavery if you need to pay off credit cards with high interest rates, finance a home renovation project, or build up your emergency savings account.

 

But here's the catch: Texas maintains a few of the most stringent home finance laws in the country, and cash-out refinancing is governed on its behalf. From the dollar amounts that you can borrow to when you can refinance all over again, the system can look intimidating- if you've never done it before, that is.

 

This step-by-step guide accompanies you through the process of explaining just exactly how cash-out refinancing is accomplished in Texas from beginning to end. You'll discover the legal restrictions, the procedures necessary, some useful tools, and even some things to avoid. So let's begin.

What is Cash Out Refinance Texas?

Cash-out refinance is a home loan choice wherein you borrow against your existing home loan through a new, bigger loan and take the difference in cash. This is regulated in Texas under Section 50(a)(6) of the Texas Constitution, which gives you the rules of the road when borrowing against your home equity.

 

And how do they do it? If your home is worth $400,000 and you owe $200,000 on it, then according to the Texas home equity law, you can borrow up to 80% of the value of your home $ or $320,000. That leaves you with $120,000 in potential cash back, minus closing costs.

 

It is distinct from a HELOC vs cash-out refinance scenario in that, here, you would be refinancing your original mortgage, and not borrowing against the second lien. That is important because cash-out refinancing is regulated more strictly in Texas than most forms of refinancing a mortgage.

 

The terms that you would most often hear are the following: Cash Out Mortgage, Home Equity Loan, and Texas Refinance Mortgage, all combinations, but very frequently used interchangeably once the homeowners begin exploring their alternatives.

Why Is Cash Out Refinance Texas Significant?

There is good sense why Texas is becoming increasingly popular with equity refinancing. First and foremost, it is a sensible financial move in the majority of situations. Instead of carrying credit card balances or accumulating high-interest personal loans, you're borrowing against your home's equity, usually with significantly lower interest rates.

 

Due to the recent housing boom, Texas residents have seen their values skyrocket. To be precise, in Q2 2025 alone, there were 9% more equity-based refinance applications. Why is that? Because residences are more valuable, many homeowners now qualify for much more than they did last year.

 

Regardless of whether you need to refinance debt, remodel a kitchen, or even finance a new venture, a Texas cash-out refinance allows you to tap into the value of your home and lower your rate compared to other loans.

 

Because the interest is mortgage interest, it could even be tax-deductible, which is not the case with private loans. Combine that with better cash flow, and it's not much wonder so many are shouting about this as one of Texas's home loan laws' most powerful tools today.

How to Do a Cash Out Refinance in Texas (Step-by-Step)

Step 1 – Know Your Home's Equity

Start by calculating exactly how much equity you really do have. That is, the value of your home minus your current mortgage balance. You can't guess at this point; the lenders will require a proper appraisal of your property. And under Texas statute, you'll only be allowed to borrow 80% of your house's appraised value.

Step 2 – Check Your Finances

Not everyone can be considered for a loan. Most lenders in Texas will require you to have a credit score of at least 620, a DTI of 43% or less, and proof that you intend to reside in the house as your primary residence. If you are self-employed or receive variable income, you'll need to have documentation.

Step 3 – Find a Texas-Approved Lender

This does count. Texas does place some restrictions on cash-out refinance, and not all lenders can do so. Take advantage of nearby or state-licensed lenders that know cash-out mortgage regulations, like X2 Mortgage, which is specifically licensed to do the same.

Step 4 – Submit Your Application

Have your papers handy. You'll be requiring W-2s, pay stubs, tax returns, bank statements, and your latest mortgage information. The lender will lock your rate and proceed with the underwriting process upon submission.

Step 5 – Appraisal and Title Work

An independent appraiser will come to your home and determine its fair market value. A title search will also need to be conducted to verify that there are no liens against the property that would affect the loan. Title insurance is mandatory under Texas law in any cash-out refinance. 

Step 6 – Close the Loan

Texas is 12 days from application to closing. Once that period passes, you execute the closing documents. Three-day right of rescission after that so you can back out penalty-free. Then your money is disbursed by the lender.

Tools, Resources, or Examples for Cash Out Refinance Texas

Home refinance preparation in Texas also involves being ready with the correct tools. NerdWallet and Bankrate mortgage calculators, for instance, will assist you in making estimates before you apply. You can utilize Credit Karma or Experian to track your credit score, which is a critical element in approval.

 

Websites like Redfin, Realtor.com, and Zillow can give you instant estimates of your home, which can give you an approximation of your equity before even an official appraisal.

 

And when you're ready to apply, go to X2 Mortgage's refinance website and search for offers individualized to the Texas cash-out refinance process.

Texas Cash Out Refinance Mistakes or Misconceptions

Most homeowners jump headlong into the refinance with no knowledge of Texas home equity laws, and you'll be throwing away a lot of cash. The most common myth is that you can borrow more than 80% of your home's worth, and you can't. That's an absolute no-no in Texas.

The other thing is not shopping around. Every lender charges something different, has a different fee, and has a distinct timeframe. You can save thousands by comparing a few. And keep in mind that you are going to have to spend the money wisely. Spending money on debt, like high-priced cars or vacations, can turn home equity into bad debt.

 

They read the fine print elsewhere, but when refinancing a mortgage, Texas laws are different. Read your disclosures always. And finally, if you need cash quickly, be prepared for the mandated 12-day waiting period, then a three-day cooling-off period.

FAQs Surrounding Cash Out Refinance Texas

How much can I borrow in a cash-out refinance in Texas?

You may refinance up to 80% of the appraised value of your home, less the amount you already owe. The Texas Constitution presumes the limit is applied statewide.

Is a cash-out refinance taxable in Texas?

No, the funds you withdraw are not taxable income and are not taxable. But if you're going to invest the funds, be sure to speak with a tax advisor for personal consequences.

How long does it take in Texas?

From application to closing, the average is 30 to 45 days. That's all waiting periods in statute and state-mandated appraisals.

Can I refinance again after a cash-out in Texas?

Yes, but wait 12 months from your prior cash-out refinance. That's a Texas regulation that favors homeowners.

Is a home equity loan better than a cash-out refinance in Texas?

It only meets your requirements. A home equity loan is a second lien, while a cash-out refinance uses your current mortgage. Both of them have pros and cons according to Texas home loan law.

Conclusion

If you do have equity and are considering how to make it work for you, a Texas cash-out refinance could be the answer. If you're looking to improve your lifestyle, pay off debt, or put money away for the future, understanding how can make you a better financial decision-maker.

Now that you have the preview, you can proceed and see what is out there. Most of all, it is working with a lender who understands the Texas refinance mortgage market, and that is what you will find with X2 Mortgage.

Visit us at x2mortgage

 

Or call us directly at (480) 992‑4200 and let's get started today.