If you served and you own a home in Texas, you have the same VA home loan benefit as every other veteran in the country. Texas changes the ground it sits on. The state writes its home equity rules into the state constitution, and those rules decide how much cash a VA refinance can pull out, how long the closing takes, and even where you sign.

Smart, careful homeowners get surprised by this every year. The information is out there, but it tends to arrive at the closing table instead of the kitchen table. This guide walks through the two main VA refinance options for Texas veterans, the Texas rules that apply to each, and how to run the numbers on your own situation before you talk to anyone.

The two VA refinance options, and why Texas treats them differently

The VA offers two refinance paths for homeowners with a Certificate of Eligibility.

The first is the Interest Rate Reduction Refinance Loan, usually called the IRRRL or the VA streamline refinance. It replaces an existing VA-backed loan with a new VA-backed loan. No cash comes out beyond small amounts tied to the transaction.

The second is the VA cash-out refinance. It can replace any existing loan, VA or not, and lets you take part of your equity as cash. Veterans use it to pay off higher-interest debt, fund repairs, or move out of a conventional or FHA loan into a VA loan.

Texas cares about that difference. A refinance that takes no new money out of the home is treated as an ordinary rate and term refinance. A refinance that puts cash in your hands is a home equity loan under Article XVI, Section 50(a)(6) of the Texas Constitution, and it carries a full set of state protections that sit on top of the VA's own rules. Where the two sets of rules differ, you follow the stricter one.

The VA IRRRL in Texas: the lighter path

For Texas veterans who already have a VA loan and want a better payment or a more stable loan, the IRRRL works much the same as it does anywhere else.

The main VA requirements are straightforward:

  • Your current loan must already be VA-backed.
  • You must certify that you live in the home now or lived in it before.
  • The VA requires a seasoning period: the new loan cannot close until at least 210 days after the first payment on your current loan was due, and you must have made at least six monthly payments.
  • The refinance has to leave you better off in a measurable way, such as a lower payment or a move from an adjustable rate to a fixed one.
  • The VA funding fee on an IRRRL is 0.5 percent of the loan amount, and veterans who receive VA disability compensation are exempt from it.

Because no cash comes out, a standard Texas IRRRL is not a home equity loan, and the 50(a)(6) rules below do not apply to it.

The one Texas wrinkle: if your current VA loan was a Texas cash-out

If the VA loan you have today was itself a Texas cash-out refinance, Texas law treats it as a home equity loan, and that status follows the property. Refinancing it has two routes. You can do the new loan as another fully compliant 50(a)(6) home equity loan, or you can use the rate and term path Texas voters added in 2017, which took effect January 1, 2018.

That second path has four conditions. At least one year must have passed since the home equity loan closed. The new loan cannot exceed 80 percent of the home's fair market value. The lender must give you a specific notice at least 12 days before closing. And no new cash can come out beyond what covers the refinance and its costs.

Both routes bring back the 80 percent ceiling, which usually means documenting the home's value. An IRRRL elsewhere often skips that step. If you are not sure how your current loan was set up, the answer is in your original closing documents, and a loan officer can confirm it in a few minutes.

The VA cash-out refinance in Texas: the 50(a)(6) rules

Texas parts ways with the rest of the country here. The state constitution gives homestead owners some of the strongest home equity protections in the nation. They apply to a VA cash-out refinance the same way they apply to any other loan that puts equity in your pocket.

The 80 percent ceiling

Nationally, VA rules allow a cash-out refinance to go as high as the full appraised value of the home in many cases. In Texas, a home equity loan plus every other lien on the homestead cannot exceed 80 percent of the home's fair market value on the day the loan is made.

For a Texas veteran, that means keeping at least 20 percent equity after the refinance. Anything rolled into the new loan, including closing costs and a financed funding fee, counts toward that 80 percent.

The 12-day notice and the 3-day right of rescission

A Texas home equity loan cannot close until at least 12 days after you receive a written notice explaining your rights under Section 50(a)(6). You must also receive the final itemized fees at least one business day before closing. After closing, you have three days to cancel without penalty.

A Texas cash-out refinance takes longer to schedule than one in most states, and that gap gives you time to read what you are signing.

The 2 percent fee cap

Texas limits certain fees on a home equity loan to 2 percent of the original principal. Some third-party costs, including the appraisal, survey, title insurance, and discount points, are excluded from that cap. The cap limits the fees; it does not make the loan free, so compare the full list of costs on your Loan Estimate rather than relying on the cap alone.

Other Texas rules that shape the timing

Only one Texas home equity loan can be made on a homestead in a 12-month period, even if the earlier one has been paid off. The loan has to close at the office of the lender, an attorney, or a title company. The lien can be secured only by your homestead, with no other property, wages, or accounts pledged. And a Texas home equity loan is nonrecourse, meaning the lender cannot pursue you personally for any shortfall beyond the home itself.

The 12-month rule catches people most often. If you took equity out of your home within the past year, a new cash-out has to wait.

Running your own numbers on a Texas VA cash-out

The example below uses round figures. Swap in your own.

Say your home appraises at $400,000. You owe $250,000 on your current mortgage, and you carry $35,000 across a car loan and two credit cards.

The Texas ceiling is 80 percent of $400,000, or $320,000. That is the most the new loan can be, including anything you finance into it.

If you are exempt from the funding fee because you receive VA disability compensation, and you roll $8,000 of closing costs into the loan, the math looks like this:

  1. Start with the $320,000 maximum.
  2. Subtract the $250,000 payoff on your current mortgage.
  3. Subtract the $8,000 in financed closing costs.
  4. That leaves up to $62,000 in equity you could use, enough to clear the $35,000 of other debt with room to spare.

If you are not exempt and this is your first use of the benefit, the VA funding fee on a cash-out refinance is 2.15 percent of the loan amount. On a $320,000 loan that is $6,880. If you finance it, it comes out of that same 80 percent, and the available cash drops accordingly. For a later use of the benefit, the fee is 3.3 percent.

You do not have to borrow the maximum. The right amount solves the problem you came in with and leaves a cushion of equity behind.

Look past the rate: the full financial picture

A lot of Texas veterans are sitting on a mortgage with a rate they are proud of. That rate is real value. It can also become a trap if it keeps you paying far more on everything else.

The number that matters is your blended rate: the combined cost of every debt you carry, weighted by balance. A homeowner with a low mortgage rate and $35,000 of card and auto debt at much higher rates often pays more each month in total than the mortgage rate alone suggests. A cash-out refinance replaces the whole mortgage, so compare your total monthly outlay and total long-term cost before and after.

Answer these with your own figures:

  • What do you pay each month today across the mortgage and every other debt combined?
  • What would the single new payment be, including taxes and insurance?
  • How much would you pay in total over the years you realistically expect to stay in the home?
  • How long until the savings cover the closing costs? That is your break-even point.
  • If you roll short-term debt into a 30-year loan, are you willing to pay extra toward principal so it does not stretch out for decades?

Sometimes the answer is that a cash-out refinance is the right move. Sometimes the better plan is to keep the mortgage you have and handle the other debt a different way. A good loan officer will tell you which one your numbers point to, and at GoodLoan we say no a lot when the math does not work.

Texas costs that belong in the math

Texas has no state income tax, and it leans heavily on property taxes instead. That makes the escrow portion of a Texas mortgage payment larger than many veterans expect, and it is worth reviewing any time you refinance.

Texas also offers property tax exemptions to disabled veterans, which the Texas Comptroller explains in detail. A veteran with a 100 percent disability rating, or a rating of individual unemployability, from the VA can receive a full exemption on their residence homestead. Veterans with ratings from 10 to 99 percent can receive a partial exemption that reduces their home's taxable value by $5,000 to $12,000, depending on the rating.

These are benefits you earned. If you qualify and have not applied through your county appraisal district, your escrow may be collecting more than it needs to. A refinance is a natural moment to check that your exemptions are in place and that the new escrow reflects them.

A calm way to take the first step

You do not need to decide anything today. A useful first conversation takes about 15 minutes and needs only a few things:

  • A recent mortgage statement.
  • A rough list of your other debts and their monthly payments.
  • Your best guess at your home's value.
  • Your VA disability rating, if you have one, since it can affect both the funding fee and your property taxes.
  • Whether your current loan was a Texas cash-out, if you know.

With that, a GoodLoan loan officer can show you side by side what an IRRRL, a VA cash-out refinance, or keeping your current loan would look like, including the Texas rules that apply. GoodLoan is VA-approved and licensed through the NMLS, and the point of that first call is to give you a clear picture of your options.

Frequently asked questions

Can I get a VA cash-out refinance in Texas?

Yes. Texas veterans can use the VA cash-out refinance, but because it takes equity out of a homestead, it must also follow Section 50(a)(6) of the Texas Constitution. The biggest difference is the 80 percent ceiling on the home's value, compared with the higher limit VA rules allow in many other states.

Does the 80 percent limit apply to a VA IRRRL in Texas?

Usually not. A standard IRRRL takes no cash out, so Texas treats it as a rate and term refinance. The exception is when your current VA loan was itself a Texas cash-out refinance. Refinancing that loan brings back the 80 percent limit and a 12-day notice.

How long does a VA cash-out refinance take to close in Texas?

Texas requires at least 12 days between the written home equity notice and closing, plus a three-day right of rescission after closing. Plan for a longer timeline than in most states.

Do I have to pay the VA funding fee on a Texas refinance?

It depends on your status, not your state. The funding fee is 0.5 percent for an IRRRL and 2.15 percent for a first-use cash-out refinance, rising to 3.3 percent for a later use. Veterans who receive VA disability compensation are exempt, along with several other groups listed by the VA.

Can I do another cash-out refinance if I took one last year?

Not yet. Texas allows only one home equity loan on a homestead in any 12-month period, even if the earlier loan was paid off. Once 12 months have passed, you can apply again, subject to the 80 percent ceiling and the other Section 50(a)(6) rules.