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Texas caps a cash-out refinance on your homestead at 80% of the home's value. Pull equity out, and your new loan can't exceed that line, no matter how much equity you've built. If your house appraises at $500,000, the most you can borrow is $400,000, and everything you still owe comes out of that same $400,000. This is the heart of the Texas 80% rule, and it applies to self-employed and W-2 borrowers alike.
The rule lives in the Texas Constitution under Section 50(a)(6), the state's homestead protection. It's stricter than what most other states allow, and it shapes every cash-out decision here. If you're self-employed and planning to tap your home's value with a bank statement loan, the 80% ceiling and a few other homestead rules decide how much cash you actually walk away with.
Here's how the rule works, why Texas built it, and what it means for a self-employed borrower using deposits instead of tax returns.
A cash-out refinance replaces your current mortgage with a bigger one and hands you the difference in cash. In Texas, the size of that new loan is capped at 80% of your homestead's appraised value. The 20% you can't touch has to stay as equity, permanently, for as long as it's a cash-out loan.
Work a quick example. Your home appraises at $500,000. Eighty percent is $400,000. That $400,000 is the absolute ceiling on your new loan. If you still owe $250,000 on your current mortgage, the math looks like this:
You had $250,000 in equity, but you can't take all of it. The state makes you leave $100,000 (the 20% cushion) untouched. Whatever's left after paying off the old loan and closing costs is your cash.
The 80% figure is a hard line, not a starting point for negotiation. No Texas lender can legally write a homestead cash-out above it. That's different from a rate-and-term refinance, where higher loan-to-value is allowed because you aren't pulling cash out.
Texas has protected the family homestead since the days of the Republic. The idea was simple and stubborn: a family shouldn't lose their home to creditors over debts unrelated to the house. For most of the state's history, you couldn't do a home-equity cash-out at all.
That changed in 1997, when voters amended the constitution to permit home-equity lending, but with guardrails. The 80% cap was the central one. Lawmakers wanted homeowners to be able to access equity without stripping the house bare and risking foreclosure the moment income dipped. Leaving 20% in the home was the compromise between access and protection.
The result is a set of rules, grouped under Section 50(a)(6), that go beyond the loan-to-value cap. They include a limit on fees, a mandatory waiting period, and a once-a-year restriction. Together they make Texas cash-out refinancing safer for the borrower and more paperwork for the lender. For self-employed owners, that protection cuts both ways: less risk of over-leveraging, but a firm ceiling on how much you can pull.
The 80% cap gets the attention, but a Texas cash-out carries several other rules that affect timing and cost. Miss one and the loan can be delayed or unwound.
These aren't lender preferences you can shop around. They're constitutional requirements every Texas homestead cash-out has to follow.
If you're self-employed, the 80% rule interacts with how your income gets calculated, and the combination decides your outcome.
Two hurdles have to clear at once. First, you need enough equity, at least 20% left in the home after the cash-out. Second, you need enough qualifying income to support the larger payment. On a bank statement loan, that income comes from your deposits, not your tax returns.
Picture a business owner whose home appraises at $600,000 with $200,000 still owed. The equity side is easy: 80% is $480,000, minus the $200,000 payoff and costs leaves roughly $270,000 in potential cash. But the new loan is bigger, so the payment is bigger, and the lender has to see deposits that support it. If 24 months of business statements calculate to $14,000 a month in qualifying income, the larger payment has to fit inside the debt-to-income limit. Equity alone doesn't get it done.
This is exactly why understanding how bank statement income is calculated matters before you count on a cash-out number. Your deposits, minus the expense factor, set the real cap, and it's often lower than the equity would suggest.
Yes. The 80% cap is a state constitutional rule tied to the property and the homestead, not to the loan program. It doesn't matter whether you qualify with tax returns, W-2s, or 12 to 24 months of bank statements. If it's a cash-out refinance on your Texas homestead, the ceiling is 80% of the appraised value. Full stop.
The loan type changes how your income is verified, not how much equity you can pull. A bank statement loan simply lets a self-employed owner reach that 80% line without handing over tax returns. The line itself doesn't move.
Same logic for a rate-and-term refinance, where you're not taking cash. Texas allows higher loan-to-value there because the homestead cash-out protections don't kick in the same way. The bank statement refinance guide breaks down the difference between rate-and-term and cash-out for self-employed owners.
Want to estimate your own cash before you talk to anyone? Run these steps.
Then pressure-test the payment. A bigger loan means a bigger monthly bill, and Texas property taxes and insurance ride on top. Your deposits have to support all of it inside the lender's debt-to-income limit. Plug your figures into the bank statement loan calculator to see whether the income side keeps up with the equity side.
| Home value | 80% cap | Owe now | Rough cash out (before costs) |
|---|---|---|---|
| $400,000 | $320,000 | $180,000 | ~$140,000 |
| $500,000 | $400,000 | $250,000 | ~$150,000 |
| $650,000 | $520,000 | $300,000 | ~$220,000 |
These are illustrations, not quotes. Closing costs, second liens, and the appraisal all shift the final figure.
The 80% rule is simple, but a few misreadings cost borrowers time and money.
Most of these come down to one thing: the 80% cap and the income requirement are two separate gates, and you have to clear both.
If the 80% ceiling leaves you short of the cash you wanted, a few other paths exist.
A HELOC or second lien can layer on top of a first mortgage, though Texas homestead rules still limit total borrowing against the home to 80% combined. The cap follows the property, not the number of loans.
A rate-and-term refinance makes sense if your real goal is a lower payment or a better loan structure rather than cash. It sidesteps the cash-out classification and often allows a higher loan-to-value.
Waiting to build more value is sometimes the smart move. Since the cap is a percentage of the appraised value, a higher appraisal down the road raises the dollar amount you can access.
Cash-out on an investment property isn't bound by the homestead cap at all. If the equity you're chasing sits in a rental rather than your home, the rules are different and often more generous.
A licensed Texas loan officer can map which of these fits your equity, your income, and your timeline. Start with the how it works overview to see the sequence.
The 80% cap limits how much you can pull, but it doesn't limit what you do with it. Texas homestead cash-out proceeds come with no restriction on use, which is part of why owners reach for them. Common uses among self-employed borrowers:
Each use has a tradeoff worth weighing. Consolidating a five-year debt into a thirty-year mortgage lowers the monthly bill but can raise total interest paid. Pulling equity to invest works only if the return beats the cost of the cash. A cash-out is a tool, and like any tool it rewards a clear plan and punishes a vague one.
Whatever the use, the two gates still apply. You need the equity to reach the amount and the deposits to support the larger payment. Neither one bends because the reason is a good one.
A Texas homestead cash-out refinance rewards owners who plan around both gates: 80% loan-to-value and enough qualifying income to carry the new payment. For self-employed borrowers, the income side runs on deposits, not tax returns, which is where a bank statement program earns its keep.
Before you commit, get clear on three numbers: your likely appraised value, your current payoff, and your monthly qualifying income from 12 to 24 months of statements. Those three decide almost everything. See how pricing factors in on the rates page, and review the full bank statement mortgage requirements so nothing in underwriting surprises you.
Texas Bank Statement Loans is not a lender and this is not a commitment to lend. We connect self-employed Texans with licensed mortgage professionals who handle homestead cash-out refinances every week. The free 60-second eligibility check shows where you stand, with no credit pull.
See what you qualify for in 60 seconds, free and no credit check. Use the eligibility check at the top of this page.
Up to the point where your new loan hits 80% of your home's appraised value. Your current mortgage payoff and closing costs come out of that 80%, so the cash you receive is the 80% cap minus what you still owe minus costs. On a $500,000 home with $250,000 owed, that's roughly $140,000 to $150,000.
Yes. The 80% cap is a Texas constitutional rule tied to your homestead, not to the loan program. Whether you qualify with tax returns or 12 to 24 months of bank statements, a cash-out on your primary home can't exceed 80% of the appraised value.
No. The homestead cap applies to your primary residence. Investment properties, including rentals financed with a DSCR loan, follow different rules and often allow more cash out than the 80% homestead limit.
Once every 12 months on your homestead. If you closed a homestead cash-out recently, you generally have to wait a full year before doing another one.
Texas limits certain closing fees on a homestead cash-out to 2% of the loan amount. Some third-party charges like the appraisal, survey, and title insurance sit outside that cap, but it keeps origination-style fees controlled.
Often yes. A rate-and-term refinance doesn't give you cash, so the homestead cash-out protections don't apply the same way, and Texas allows a higher loan-to-value. It's the tool to reach for when you want a better payment rather than cash.
You must receive a required disclosure at least 12 days before a homestead cash-out closes. It's a built-in cooling-off period, so factor those days into your timeline.
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