Cash-out refinancing in Texas

[Nitin Dhiman]

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.

Thanks!

[Jay Hurst]

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!