What are Refinancing Loans in Texas?
Refinancing loans in Texas are mortgage loans available to borrowers that currently have a mortgage. Refinance loans allow the existing homeowner in Texas to get cash back at closing. These mortgage loans are considered a Cash Out Refi Loan.
The latest statistics available on refinance loans in Texas is from 2021. According to the The Texas Office of Consumer Credit Commissioner (OCCC) there were 34,432 refinance loans. An increase of 39.7% up from 2020 numbers of 24,649. On average the 2021 refinance loan in Texas was approximately $223,887. The total dollar amount in refinance loans for 2021 was $7,708,880,666.
Below we will discuss the 2023 refinancing rules for lenders and a calculator to determine refinance rates for new mortgages.
How does a Cash out refinance work in Texas?
A Texas Cash out refinance works like this: Borrowers can refinance their current mortgage and access the equity in your property. The equity in your property is paid to the borrower in cash at closing. The cash at closing can be used to for anything there are no restrictions. Texas does not have any restrictions on how you can use your withdrawn equity. Texas does have restrictions on the Cash Out Refinance Rates as discussed below.
What are the Refinancing Rates in Texas?
Refinance Rates in Texas are slightly lower compared to rates of a standard term refinance loan. Standard term refinance loans directly fund the mortgage however this is not the case for Refinance loans. Therefore the Cash Out Refinance Rates are higher because the equity is being pulled out of the home in the form of cash back. We will discuss the Cash Back Refi rules next.
What are the Texas Cash Back Refi rules?
There are several Texas Cash Back Refi rules. One of the Texas Cash Out Refi rules is the total closing costs cannot exceed three percent (3%) of the loan amount. This is where the rule will apply to subsequent mortgages after the initial cash-out loan. When a homeowner refinances and existing cash-out refi loan, not only will the rule regarding rate and 80% loan to value (LTV) applies, the 3% Closing Costs rule will also apply. This is true for the remaining term of the loan until such time that the loan is paid off in full in the future. Again, specific changes in Texas Cash-Out rule for 2018 applies to this provision.
What is a Texas 50a6 Cash Out?
A Texas 50a6 loan is the same as a Cash Out Refinance in Texas. People typical refer to it as the “Texas (a)(6) loan” when they meant to say a Texas Cash Out. A Texas Section 50 (a)(6) mortgage loan covers any mortgage originated under the provisions of Article XVI, Section 50 (a)(6), of the Texas Constitution. This Article XVI, Section 50 (a)(6), of the Texas Constitution allows any borrower to pull equity out of their primary residence with certain restrictions and conditions.Below we will discuss the Cash Out Refinance Requirements.
Texas Cash Out Refinance Rules, Guidelines 2022
The cash out refinance rule changes are as follows:
- Eliminating the provision prohibiting home equity loans on properties with an agricultural exemption other than dairy farms – Lenders may close a Section 50(a)(6) loans on properties with an agricultural exemption in place at the time of closing.
- Reducing the 3% fee cap to a 2% fee cap with certain fees excluded from the 2% fee cap – The total fees for the refinance loan cannot exceed 2% of the total loan amount but third-party fees are excluded. The following fees are exempt from the 2% fee cap:
- an appraisal performed by a third party appraiser,
- a property survey by a state registered or licensed surveyor,
- a state base premium for mortgagee policy of title insurance with endorsements established in accordance with state law, or
- if a mortgagee title policy is not issued, a title examination report if its cost is less than the state base premium for a mortgagee title policy without endorsements.
- Permitting, under certain conditions, a home equity loan to be refinanced as a non-home equity loan – The SJR60 allows the owner to refinance the home equity loan as a non-home equity refinance loan under Article XVI, subjection 50(a)(4) if:
- the refinance is not closed before the first anniversary of the date the home equity loan was closed;
- no additional funds are advanced other than the funds advanced to the homeowner from the original transaction;
- the principal amount of the refinance when added to the aggregate total of the outstanding principal balance on the loan does not exceed 80% of the homestead’s fair market value at the time of refinancing; and
- the lender provides the owner a written notice prescribed by proposed subsection (f)(2)(D) of SJR60 on a separate document within three (3) business days of application and at least twelve (12) days before the refinance is closed.
- Repealing the 50% ceiling on additional advances under Home Equity Lines of Credit or HELOCs – The SJR60 eliminates subsection 50(t)(6) that prevents additional advances on a HELOC if the principal amount outstanding on the HELOC exceeds 50% of the fair market value of the homestead on the date the HELOC was established. However, the 80% fair market value cap under subsection (a)(6)(B) is not affected by the repeal of subsection 50(t)(6).
- Updating who is authorized to make home equity loans – subsection (a)(6)(P)(i) states that subsidiaries of the banks, savings and loan associations, savings banks, and credit unions doing business under the laws of Texas or of the United States also may make home equity loans. The subsection (a)(6)(P)(vi) replaces the term “broker” with “banker” or “mortgage company”, clarifying that licensed mortgage companies and registered mortgage bankers may make home equity loans.
- Amending the 12-day Notice Disclosures prescribed for 50(a)(6) loans – the addition of a provision that states, “fees and charges to make the loan may not exceed 2 percent of the loan amount, except for a fee or charge for an appraisal performed by a third party appraiser, a property survey performed by a state registered or licensed surveyor, a state base premium for a mortgagee policy of title insurance with endorsements, or a title examination report. Basically, the 3% fee cap changing to a 2% fee cap with exceptions.
Cash Out Refinance Texas FAQs
In Texas the Cash Out Refinance loan-to-value (LTV) cannot exceed 80% of the maximum loan amount .
The answer is yes, Texas does allow cash out refinance to borrows that have enough home equity.
The answer is yes, You can do cash refinance loans in Texas through the Texas Mortgage Pros.
Cash out refinancing occurs when a loan is taken out on property already owned, and the loan amount is above and beyond the cost of transaction, payoff of existing liens, and related expenses.
The terms for a Cash Out Refinance in Texas are as follows:
- Fixed Rates are eligible for 15 to 30 year terms
- Adjustable Rate are eligible for are 7 to 10 year terms.
- Adjustable Rate are not eligible for 3 to 5 years terms.
Here are requirements to qualify for a Cash Out Refinance in Texas:
- The borrower must have 6-month ownership of the property being financed;
- All liens on the property must be paid off upon closing;
- Borrowers are required to wait 12 months between Cash-Out Loans.
All loans are subject to underwriting or investor approval. Other restrictions may apply. This is not an offer of credit or a commitment to lend. Guidelines and products subject to change.