Cash-out refinancing in Texas

18 Replies

Hello experts,

I'm trying to do a cash-out refinance of a single-family rental in Texas. The property has been rented out for the last 4 years and I live in California. I'm being told by some conventional lenders that Texas doesn't allow cash-out refinancing of a rental if I don't own a primary residence in Texas. Something about Texas (a)(6) rules (?).

The issue is that only 2 out of 8 banks I've spoken to are aware of this, while the others can't confirm. I don't want to spend weeks in an application process if there's a chance that I'll run into this with underwriters at some point before close.

If you're familiar with this problem, I could definitely use your guidance.


Do you own a primary in California?  If so, I know a lender who will do it but the property can't be in a rural area.

Hi @Robert Grant . Thanks for the response. I don't own any property in California. I'm renting currently. (I don't own any property outside of Texas).

@Nitin Dhiman Unless something has changed that I'm not aware of, there's no rule that you have to own a primary home in TX to cash out refi a rental in TX. In fact, the TX 50(a)6 rules don't even apply to a rental at all; they apply only to a refinance on a primary residence in TX where you're taking out cash or took out cash at some point in the past. 

I would check with a few other lenders. It could be that you're running into a lender guideline overlay, which is when banks add their own guidelines on top of the standard Fannie Mae guidelines. 

Hope this helps!

@Nitin Dhiman
I think someone else asked a similar question before so do a search and see if you can find the answer. I also looked into this recently (last week) and wasn't told that I can't refi to cash out from my DFW property.
Let me know if you need to connect to someone.

Give Lisa Love at CMG Financial a call.  She's out of Austin.  She's been a great help and can probably tell you right away if this is the case.  Else, she can relay the question to underwriting

TX 50(a)6 only applies to a homestead property here in Texas.  You can definitely do a cash out refi on your investment property and not own a primary residence in Texas.  The lender may have an overlay for some reason that won't allow it, but I've never heard of that sort of overlay.  I've had out of state clients do cash outs many times.  You may want to review these guidelines for eligibility as well...

Thanks everyone for your very helpful responses. @Justin Fox , I'll contact Lisa at CMG tomorrow. Thank you for the reference.

@Nitin Dhiman how did things turn out with CMG?  I was told this by one company, and also want to get a competing offer from the other company I am working with?



@Nitin Dhiman I just spoke with Quicken Loans and the 50(a)6 rule does not apply to investment properties. QL does have a 6 month seasoning requirement though. Did you ever find a lender to do your cash out refi? I am looking for one now... 

@Carol Kohn There is an exception to the 6 month seasoning called delayed financing. Look at the link I posted in this thread under delayed financing exception.  I've done many of these over the last few years.

@Carol Kohn  Yes, that is 100% accurate. If you're financing an investment property, the 50(a)6 rules don't apply. If you do move forward with a lender, you may find you need to be your own advocate when working with them to get your loan done. I financed an investment property in TX a few years back and the processor who worked on my loan had a very low understanding of the 50(a)6 rules. As a result, she tried to treat my loan as a 50(a)6, which would have a resulted in a few added headaches and a few additional paperwork requirements. 

@Nitin Dhiman and @Carol Kohn did you ever have any luck on the refi's?  I'm currently in the same situation where I want to cash out refi three investment properties in Houston and Citi is telling me I need to have a primary residence in Texas to do so (I live in Miami and don't own a primary residence). I think they are wrong per the previous comments and treating this like a primary residence cash out, and I'm trying to educate them. Their rates are good, that's why I'd like to stay with Citi for the refi's. Thanks.

@Bret Faszholz did you have luck with Citi? I just had the exact same conversation with them, and he wasn't able to give me any guidance on where this guidline was coming from so I could do research... Couldn't say if it was a bank guideline, a Fannie Mae guideline, or a state of Texas law.  Just said if I don't have a homestead in Texas (I own a primary here, but won't be able to be classified as a homestead until next year), you can't pull cash out of an investment property here. 

@Rivy S. no luck with Citi, Wells Fargo or any of the large lenders. They added an 'overlay' to the rule which requires you have your primary residence in TX (this is a bank-added rule, not Fannie Mae or TX gov't). I found smaller banks willing to do the refi's and using Hurst Lending now...they did not require a primary in TX to do the cash out refi's.

This is an old thread but still looks to be a bit unanswered. I just stumbled on it and noticed I am mentioned in the above post. So, thought I would answer it hopefully thoroughly. 

There is NO law in Texas that precludes you from taking cash out of an investment property in Texas. The only laws regarding cash out are around homesteads. But, because homesteads are a bit hairy in Texas a lot of big lenders just simply do not do them just to make sure they do not run afoul of the Texas A(6) law. The rank and file loan officers are just confused and say cash out of investment properties are illegal in Texas because they know there are some sort of restrictions on cash out and Texas.  So, not Texas law issue period. 

You do NOT have to own a homestead outside of Texas. You can rent in say CA, but still take cash out of a non-owner property in Texas. But, many lenders who might generally allow for cash out on non-owners are afraid of this situation because they are concerned that it might really be your homestead since you have not bought a new house. So, they have an overlay.  For us, it has to pass the smell test. If you have moved to CA (or have always lived in CA and invested in TX) and your life, job etc are in CA then we are comfortable that you are not trying to disguise a  homestead as a non-owner to skirt the A(6) law. 

Hope that helps!

I have also been trying to do a cash out refinance for a rental in Austin and my primary residence is in Oklahoma. I have talked to Chase and they did not mention anything about my primary residence having to be in Texas. I also started an online application with Rocket Mortgage (Quicken Loans) and they told me it was Texas law that I could not do cash out refinance for an investment property if I did not live in the state. I will be contacting a couple of independent lenders in case I am mistaken. 

I am refinancing in Texas as well. I live in the state so this has not come up for me. Rocket mortgage reps have a decision tree they go through on the call and disqualify a lot of properties for various reasons. They wont do tri or fourplexes for example. Check with your insurance company as well. They know they rules and may even be able to give you a cash out refi. My state farm agent is a licensed mortgage broker and has been a huge resource. 

Saw this in the recent threads so I thought I'd drop a line in. I ran some numbers -- your max LTV on a cash-out refi in TX for an investment property is 75%, and your rates suck, but you can definitely do it as long as you can show 3 months of reserves.

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here