HELOC vs. Cash-Out Refi in Texas: What’s the Right Way to Tap Your Equity?

💭 Feeling Stuck in Place with High Interest Rates?

You’re not alone.

With mortgage rates hovering around 7%, many Texas homeowners are hitting pause on buying or selling. But if you have equity in your current home, you don’t have to sit on the sidelines.

✅ Instead of moving, you may be able to use your equity—without giving up your low interest rate.

That’s where HELOCs and cash-out refinances come in. Let’s break down the differences, the rules (especially in Texas), and how to choose what’s best for your situation.

🔁 What Is a HELOC?

A Home Equity Line of Credit (HELOC) is a revolving line of credit backed by your home’s equity.

• Works like a credit card: borrow only what you need, when you need it

• Interest-only payments during the draw period (5–10 years)

• Typically has variable interest rates

• Often sits in second lien position (you keep your current mortgage)

✅ Best for: Flexible access to funds, phased home renovations, college tuition, or emergency reserves

💸 What Is a Cash-Out Refinance?

A cash-out refinance replaces your existing mortgage with a larger one—and gives you the difference in cash.

• Fixed-rate loan with full amortization from day one

• Lump sum payout at closing

• Typically comes with higher closing costs

• Resets your mortgage term and interest rate

✅ Best for: One-time large expenses like debt consolidation, major remodels, or investments

📊 Side-by-Side Comparison

🛑 Texas Has Its Own Rules (And They Matter)

Texas law limits how and when you can borrow against your home equity:

1. Only one home equity loan at a time (includes HELOCs & cash-out refis)

2. Max 80% loan-to-value (LTV) on your primary residence

3. 12-month waiting period between equity transactions

4. HELOCs allowed only on primary residences

5. Lender fees capped on home equity loans (excluding taxes and insurance)

🔍 Can You Get a HELOC After a Cash-Out Refinance?

In Texas? Not right away.

📌 Texas considers both a HELOC and a cash-out refinance as "home equity loans." You can’t take out another until at least 12 months have passed.

💡 Real Life Example

Let’s say your home is worth $500,000 and your mortgage balance is $350,000.
You could potentially access up to $50,000–$60,000 in equity without going over the 80% cap.

Depending on your needs:

• Use a HELOC to pay for upcoming college tuition over time

• Or do a cash-out refinance to consolidate debt and reduce interest payments

📉 Not Ready to Buy Just Yet? This Is the Next Best Move.

If you:

• Love your current home

• Have a locked-in low interest rate

• Want to avoid jumping into today’s market...

...tapping your equity is a smart, strategic alternative.

You can use the value you've already built to:

• Fund a renovation

• Cover education expenses

• Launch a side hustle

• Pay down high-interest debt

• Prep your home for future sale

And you don’t have to sell, move, or sacrifice your current mortgage rate.

💬 Final Takeaway

Whichever route you choose, know the rules—especially in Texas—and align your choice with your long-term goals.

📲 Let’s Talk Strategy

Not sure which fits your situation best?
As a Texas-based real estate expert, I can help you evaluate your options and connect you with trusted local lenders who understand our unique equity rules.