The “SJR 60” went into effect January 1, 2018 and while we
could spend all day on the language there were 3 really important changes to
Texas Home Equity Laws because of this legislation passing. This is just for Texas and these rules only
apply on your primary home. Specially,
this is referred to the “Texas 50(a)6 rule”.
These rules don’t have anything to do with investment property cash out
rules but it might impact us in different ways
1.
The
50(a)4 Change - There was a common phrase in Texas “once a cash out,
always a cash out” which essentially meant that if you took a Texas Cash Out
loan on your primary home it would ALWAYS be a cash out loan…even if you
refinance later and didn’t receive cash out.
Since January 1, 2018 you can now refinance your 50(a)6 loan into a
50(a)4 loan.
The reason why this is important is that you can
now take a cash out loan AND then get a HELOC on your property. Prior to this rule, if you had received a
cash out loan you would not have been able to get a HELOC on your home
In order to convert your 50(a)6 loan into a
50(a)4 loan you would need to…
i.
Wait 12 months or longer from when you received
your 50(a)6 loan
ii.
Refinance your 50(a)6 loan into a 50(a)4 loan
iii.
Not receive any funds when you refinance into
the 50(a)4 loan
So while refinancing will be an
additional cost you can now tap your equity in the form of a HELOC whereas
before you could not. Keep in mind this is ONLY a benefit if you previously
received a 50(a)6 loan and you want to receive a HELOC loan on your primary
home.
2.
HELOC
Threshold - Another important change to the law was that the 50%
threshold on a HELOC was repealed.
Previously, you could only receive 50% of the value of your primary home
with a HELOC. You can now tap into
greater than 50% of the appraised value of the home. In Texas, the limit on cash out loans is 80%
and that threshold is still present but if you own your primary home free and
clear your HELOC can now be up to 80% of the value of the property.
3.
Ag
Exemptions - The 3rd important change to the Texas Cash Out
laws is that an property with an agricultural exemption CAN receive a cash out
loan. Previous to this change if your
property had an agricultural exemption you would have had to remove that
exemption, refinance into the 50(a)6 loan, then reapply for your
exemption. Since each county governs
this exemption it was very difficult with some counties and still really
annoying with other counties. Now, none
of that is even necessary. Keep your
agricultural exemption and receive a cash out loan.
Texas cash out laws are very confusing. Probably the most confusing of any of the 50
states. But the change this January
helps out those of us who live in Texas.
If you have any other questions on these changes feel free to post here.
Thanks!