VA cash-out refinance in Texas: why it's barred on your homestead, and 4 options that work

8 min read · LenderMatch Learn

No. A VA cash-out refinance that puts cash in your hand can't be made on a Texas homestead, because the Texas Attorney General concluded in 2018 (Opinion KP-0183) that the VA's guaranty counts as extra collateral, which the Texas Constitution forbids on a home equity loan. You can still refinance with a VA IRRRL or a no-cash VA refinance, and you can reach your equity with a conventional Texas cash-out refinance or a home equity loan or HELOC, each capped at 80% of your home's value.

Below: why the rule exists, whether it still applies in 2026, the four options that do work, and a $400,000 example that shows which one keeps your low VA rate. When you are ready, you can describe your Texas home once and compare what lenders offer for a HELOC or a refinance.

Why doesn't Texas allow a VA cash-out refinance?

Under Article XVI, Section 50(e) of the Texas Constitution, a refinance that advances new money can be secured by your homestead only if it is a Section 50(a)(6) home equity loan, or if every extra dollar goes to refinance costs or a few listed purposes such as property taxes. So a cash-out refinance of the home you live in is a home equity loan, with all of the 50(a)(6) rules.

One of those rules, 50(a)(6)(H), says the loan may not be "secured by any additional real or personal property other than the homestead." A Texas state rule, 7 TAC 153.8(2), adds: "A guaranty or surety of an equity loan is not permitted. A guaranty or surety is considered additional property for purposes of Section 50(a)(6)(H)."

A VA-backed loan comes with a guaranty from the Department of Veterans Affairs. In 2017 the chair of the Texas House Committee on Defense and Veterans' Affairs asked the Attorney General whether veterans with VA loans could take a cash-out refinance on their homestead. The answer, Opinion KP-0183, issued February 26, 2018, was no:

"Because of the guaranty by the federal government, which is additional collateral, Texas Constitution, article XVI, subsection 50(a)(6)(H) prohibits a U.S. Department of Veterans Affairs cash-out refinance loan."

Texas Attorney General Opinion KP-0183, summary (February 26, 2018)

The opinion accepted that many terms of a VA cash-out "might be written to comply" with the Texas rules and decided the question on the guaranty alone. The state mortgage regulator had reached the same conclusion a year earlier, writing that "veterans having VA loans are not able to obtain a cash-out refinance (equity loan) loan in Texas."

Outside Texas, VA lets a cash-out refinance reach up to 100% of the home's value (38 CFR 36.4306). Our guide to VA cash-out refinance requirements covers the national rules.

Is it still true in 2026?

As of October 22, 2026, yes, based on every primary source we checked:

• The constitution hasn't changed. Section 50 was last amended by voters on November 7, 2017, before the opinion was issued, and 50(a)(6)(H) still reads the same.
• The state rule is still in force. 7 TAC 153.8 was amended in 2020, and the guaranty sentence quoted above is still there word for word.
• A 2025 proposal died. S.J.R. 79 would have let VA-guaranteed loans exceed the 80% cap. It was referred to committee on March 25, 2025 and went no further, and it left the no-additional-collateral rule alone.
• No later ruling was found. We found no later Attorney General opinion and no Texas or federal court decision that reverses KP-0183.

An Attorney General opinion is a legal interpretation, not a court judgment, but here it is backed by the state agency rule, and the Texas Constitution protects lenders that follow those agency interpretations.

What a Texas veteran can do instead

The opinion itself notes that the home equity rules do not apply to "a traditional U.S. Department of Veterans Affairs purchase money mortgage or a refinance loan." That leaves four paths.

1. VA IRRRL (lower your rate, no cash)

Under 38 CFR 36.4307, "a veteran may refinance an existing VA guaranteed, insured, or direct loan to reduce the interest rate payable on the existing loan." The new loan is limited to the old balance plus allowed closing costs and a discount of up to 2% of the loan amount, so no cash goes to you. The Texas regulator's letter says veterans in Texas "may still refinance an existing VA Loan with a VA Streamline Refinance (IRRRL) Loan." It helps only if today's rates are below yours.

2. VA refinance with no cash out (VA calls it Type I)

If your current loan is conventional, FHA or USDA, you can refinance it into a VA loan as long as the new loan, including the VA funding fee, is no more than the payoff of the old one (38 CFR 36.4306(b)). VA labels this a "Type I cash-out" refinance, but it advances no money beyond the payoff, so it is an ordinary refinance under Texas law. If the loan you'd pay off is itself a Texas home equity loan, ask a Texas-licensed lender whether a VA loan can replace it; we found no official answer.

3. A conventional Texas cash-out refinance that pays off the VA loan

The regulator's letter also says veterans in Texas may "refinance a VA loan to a conventional." If you take cash, the new loan is a 50(a)(6) loan: all debt on the home can total no more than 80% of its value, and the loan is secured only by the homestead. The trade-off is that your VA loan, and its rate, are gone. See our full list of Texas cash-out refinance rules.

4. A home equity loan or HELOC behind your VA loan

Texas allows a home equity loan or HELOC to sit behind a first mortgage that was used to buy or refinance the home, as long as the first mortgage plus the new loan stay at or under 80% of value. KP-0183 is about a VA-guaranteed home equity loan; here the VA guaranty stays on your first mortgage, and the new loan carries none. Your VA loan and its rate stay in place. A Texas HELOC has its own rules, such as a $4,000 minimum per draw; our Texas HELOC guide covers them. Lenders set their own rules for lending behind a VA loan, so ask a Texas-licensed lender.

Worked example: a $400,000 Texas home with a 3% VA loan

Say you took out a $270,000, 30-year VA loan at 3.00% in 2021. Your principal and interest payment is $1,138, and after five years you owe about $240,000. Your home is now worth $400,000.

The 80% Texas cap sets the ceiling for both cash options: 80% of $400,000 is $320,000, minus the $240,000 you owe, leaves up to $80,000 before closing costs. Two assumptions, labeled because they are not quotes. For the cash-out refinance we use 7.32%, Freddie Mac's average 30-year fixed rate for the week of October 22, 2026. For the HELOC we use 8.00%: the prime rate of 7.00% (unchanged since September 17, 2026) plus an assumed 1.00% margin.

Example only, calculated by LenderMatch. Closing costs are left out, and costs you finance reduce the cash you receive under the 80% cap. Lenders may approve less than the legal maximum.

• The cash-out costs about $527 more a month while the HELOC is interest-only, because it moves the $240,000 you already owe from 3.00% to 7.32%.
• Your blended rate with the HELOC is 4.25%: ($240,000 × 3% + $80,000 × 8%) ÷ $320,000. Try your own numbers in the blended rate calculator.
• The HELOC rate would have to reach about 16% before its interest-only payment matched the cash-out's.

The HELOC has its own risks. Its rate is typically variable: if prime rose 2 points, the interest-only payment on $80,000 would go from $533 to $667. The cash-out can make sense if your current rate is close to today's or you want one fixed payment. Our VA cash-out vs HELOC comparison covers the same choice outside Texas.

Texas requirements for any cash-out on a homestead

A conventional cash-out refinance, a home equity loan and a HELOC all follow the 50(a)(6) rules:

• 80% limit on all debt secured by the homestead, at fair market value on the day the loan is made.
• One at a time. You can have only one Texas home equity loan on the homestead, so a conventional cash-out and a HELOC can't both be in place.
• 12-day wait before closing, counted from the later of your application or receiving the required notice.
• 2% cap on most lender fees, 3 days to cancel after closing, and no new Texas home equity loan within 12 months of the last one.

What about a rental or a home that isn't your homestead?

Section 50 protects only a homestead, but VA.gov lists "You'll live in the home you're refinancing with the loan" as a VA cash-out requirement. We found no official source describing a VA cash-out on a Texas property that is not the borrower's homestead, so check with a Texas-licensed lender.

Frequently asked questions

Does Texas allow a VA cash-out refinance?

Not on a homestead when the loan gives you cash. Texas Attorney General Opinion KP-0183 (February 26, 2018) concluded that the VA guaranty is additional collateral, which Section 50(a)(6)(H) of the Texas Constitution does not allow on a home equity loan.

Why does Texas not allow a VA cash-out refinance?

A cash-out refinance of a Texas homestead must be a Section 50(a)(6) home equity loan, which can be secured by nothing but the homestead. The federal guaranty on a VA loan counts as other collateral, so a VA cash-out cannot meet that rule.

Can I get a HELOC on a VA loan in Texas?

Texas law allows a home equity loan or HELOC behind a first mortgage used to buy or refinance the home, if all debt on the home stays at or under 80% of its value. Lenders set their own rules for lending behind a VA loan, so ask a Texas-licensed lender.

Can I do a VA IRRRL in Texas?

Yes. The Texas Department of Savings and Mortgage Lending has written that veterans in Texas may still refinance an existing VA loan with an IRRRL. It lowers your rate but gives you no cash.

Does LenderMatch check my credit?

No. LenderMatch never pulls your credit. A lender you choose may check it, with your permission, when you apply.

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