The Story
Texas was the last state in the union to permit home equity lending at all. Until 1997 you essentially could not borrow against the equity in your Texas homestead.
That history left something behind: a set of protections written into the Texas Constitution itself, not merely into statute. Most Texas homeowners have never heard of them, and they are unusually favorable.
The Mechanism
If you borrow against your Texas homestead, the state constrains the deal in ways that don't apply in most states:
- AN 80% CEILING. All loans against the homestead combined generally cannot exceed 80% of the home's fair market value. Not 90, not 95. This is a hard constitutional cap, and it is the reason Texas homeowners entered past downturns with far more equity cushion than homeowners elsewhere.
- A COOLING-OFF PERIOD. There's a mandatory waiting period between applying and closing, and a further period after you receive the final terms. You cannot be rushed into it.
- A CAP ON FEES. Certain lender fees on a home equity loan are capped as a percentage of the loan amount. [VERIFY current percentage]
- ONE PER YEAR. You generally cannot take out more than one home equity loan on the homestead in a twelve-month period.
- CLOSING FORMALITIES. These loans close at specified places — a lender's office, a title company, an attorney's office. Not at your kitchen table.
- NON-RECOURSE IN SUBSTANCE. On a properly made home equity loan the lender's remedy is generally limited to the property itself.
Add the homestead protections that exist outside of lending — Texas homestead is famously well protected from most creditors, and there is no state income tax touching the appreciation — and the equity in an Arlington house is one of the better-defended assets an ordinary household owns.
The Opportunity That Comes To You
The protection is automatic. You don't file for it. It attaches to the homestead.
What's worth doing is knowing your actual position, which takes ten minutes:
- Your current mortgage balance, from your statement.
- A realistic current value — TAD's number is a starting point, and recent sales on your street are better.
- The difference is your equity. Against the 80% ceiling, that tells you what the state would even permit you to borrow, which is often much less than people assume and is a useful reality check in both directions.
Knowing the number is not the same as using it. This newsletter is not going to tell you to borrow against your house; that is a decision with real consequences that depends entirely on your circumstances. But the number itself is worth knowing, and most people are carrying a badly out-of-date estimate in their head.
The Opportunity You Create
Equity is not just a number you have. It's a number you can defend.
The 80% ceiling is calculated against fair market value — which brings us back to the same place every issue arrives. Value assessments, insurance settlements, sale negotiations, and lending limits are all downstream of what your property is documented to be worth and documented to be in.
A house with a well-documented roof, a clean maintenance record, and a dated condition history is worth more in every one of those conversations. Not because documentation is magic, but because in the absence of documentation the other party's estimate becomes the only estimate.
You're the only person who will ever build that file. Nobody is going to do it for you, and it is far cheaper to build before you need it.
Next issue: the state of Texas is very likely holding money with your name on it, and the website to check is free.
The free inspection at your home is the roof chapter of that file, and it costs nothing. 45 minutes, timestamped and geotagged photo survey, NOAA hail history for your ZIP, written condition report emailed to you and yours permanently.
Book: /book Or reply with a day.