Thinking about a kitchen overhaul, an outdoor living upgrade, or a full remodel in Fort Worth? Texas treats home equity differently than most states, so how you tap your equity can change your budget and timeline. In this guide, you’ll learn the key Texas rules that affect renovation financing, the pros and cons of common loan options, and local permitting and tax tips for Tarrant County homeowners. Let’s dive in.
Texas rules that shape your budget
80 percent cap explained
Texas limits total debt on your homestead to 80 percent of fair market value on the day you close. That means your existing mortgage plus the new home-equity loan or HELOC cannot exceed that 80 percent mark. Your available equity room is FMV multiplied by 80 percent, minus current liens. You can review the borrower protections and limits in Article XVI, Section 50 of the Texas Constitution for context and definitions (Texas Constitution, Section 50).
Fee cap and carved-out costs
Lender fees on home-equity loans are capped at 2 percent of the original principal. Certain third-party costs do not count toward that cap, including bona fide discount points, appraisals, title insurance base premiums, surveys, and title examinations. Ask for an itemized estimate early so you can see what is capped and what is excluded. For a plain-English summary of the 2018 changes, review this industry overview of Proposition 2’s updates (Texas home-equity amendments summary).
Required timing and notices
You cannot close a Texas home-equity loan sooner than 12 days after you apply or receive the required constitutional notice, whichever is later. Federal Truth in Lending rules may add a 3-business-day rescission period for eligible transactions. Build these timing requirements into your contractor schedule so draws and start dates stay on track.
HELOC rules to know
A Texas HELOC must also stay within the 80 percent total lien limit at setup. Each draw commonly must meet a minimum advance amount, and lenders can stop future advances if your outstanding balance exceeds a set percentage of the home’s value measured at origination. Because HELOCs are open-end credit, underwriting can be conservative, especially for large or phased remodels.
Nonrecourse and foreclosure protections
Texas home-equity loans are generally nonrecourse. In most cases, the lender’s remedy is limited to the homestead, and foreclosure requires a court order. These protections can influence underwriting and timelines, so plan ahead if you are targeting a specific construction start date.
One loan and refinance rules
You can have only one Texas Section 50(a)(6) home-equity loan on your homestead at a time. After the 2018 amendment, certain seasoned home-equity loans can be refinanced into a non-home-equity loan if strict conditions are met. If you are considering a cash-out refinance or a later conversion, discuss the details and timing with your lender up front (legislative and investor recap).
Fort Worth permits and taxes
City permits and inspections
Most structural, electrical, plumbing, HVAC, and many exterior projects in Fort Worth require a permit and inspections. Unpermitted work can delay loan draws, create issues at resale, and lead to fines. Confirm requirements, contractor registration, and fees before you finalize your budget (Fort Worth permitting).
Renovations and taxable value
The Tarrant Appraisal District tracks improvements through permits, inspections, and market data. Adding livable square footage, converting a garage, building an ADU, or similar upgrades can increase your appraised value and property tax bill. You can check local guidance and contacts through the Comptroller’s Tarrant County directory to understand how your project may be treated (Tarrant County property tax resources). For a practical view of reassessment triggers, see this industry explainer (how improvements affect reassessment).
Homestead exemption reminders
A remodel does not automatically remove your homestead exemption, but changes in use or ownership can affect it. Tarrant County Commissioners increased the county homestead exemption in 2024, so it is worth confirming your current filings and any deadlines with local offices (Tarrant County homestead update).
Choose the right financing mix
When a home-equity loan fits
Choose a closed-end home-equity loan when you know the project scope and costs. You get a lump sum, predictable payments, and the constitutional borrower protections. Make sure your combined liens stay within 80 percent of the appraised value and plan for the 12-day timing rule.
When a HELOC makes sense
A HELOC can work for phased projects, fixtures, or contingency funding. Draw only what you need, within product guidelines and constitutional limits. Confirm minimum draw amounts and any lender rules that could pause advances if balances grow too high relative to the home’s original valuation.
Cash-out refinance basics
If rates and costs line up, a cash-out refinance can reset your first mortgage and deliver funds for renovations. Be mindful that converting to or from a home-equity structure in Texas has strict rules. Model total cost, timing, and how the new loan changes your protections.
FHA 203(k) for rehab
If you are buying a fixer or refinancing and remodeling, an FHA 203(k) can package the mortgage and renovation funds into one loan. The limited 203(k) suits smaller projects, while the standard version covers major work with consultant oversight and staged draws (HUD 203(k) program).
Construction or unsecured options
Large structural projects may call for a construction loan with draw inspections and a later take-out mortgage. Smaller cosmetic upgrades might be faster with savings or an unsecured loan, though interest rates are typically higher. Match the product to scope, speed, and total carrying cost.
A simple planning checklist
- Confirm your current mortgage balance and estimated fair market value, then compute your Section 50 headroom: FMV multiplied by 80 percent, minus existing liens.
- Compare products: fixed home-equity loan, HELOC, cash-out refinance, or FHA 203(k) if you are also purchasing or refinancing.
- Request an itemized fee estimate showing which charges count toward the 2 percent cap and which are excluded.
- Align scope and schedule with Fort Worth permitting and inspections; gather contractor bids and confirm licensing and insurance.
- Budget for higher property taxes if your improvements add measurable value; verify homestead exemption status.
- If you already have a Texas home-equity loan, ask about seasoning and refinance paths before you commit to a new structure.
Common mistakes to avoid
- Assuming you can borrow up to 100 percent of value. Texas caps total liens at 80 percent for home-equity structures.
- Ignoring the 12-day waiting period and potential rescission timing. Your start date can slip if you compress the closing calendar.
- Overlooking carved-out fees. Appraisals, title premiums, and surveys sit outside the 2 percent cap and still affect net proceeds.
- Skipping permits. Unpermitted work risks fines, delays draws, and can become a resale issue.
- Forgetting future taxes. Major upgrades often raise assessed value and annual property taxes.
How Willoughby Agency helps
Renovations should increase livability and long-term value. Our team pairs market analysis with on-the-ground Fort Worth experience to help you frame scope, budget with local permitting and tax realities, and plan for resale.
Ready to map the right path for your Fort Worth remodel? Connect with the team at Willoughby Agency for a personalized, senior-level consultation.
FAQs
How much equity can I borrow for renovations in Texas?
- In Texas, total liens on your homestead after the new loan generally cannot exceed 80 percent of fair market value. Multiply FMV by 80 percent and subtract current liens to estimate your maximum new principal.
Do Fort Worth permits affect my renovation financing?
- Yes. Lenders often require permitted work and inspections for draw releases. Unpermitted work can slow funding and create issues at resale.
Will my Tarrant County property taxes go up after I remodel?
- The loan itself does not raise taxes, but improvements that add value can increase your appraised value and tax bill. Plan for that in your post-project budget.
What is the 12-day Texas home-equity waiting period?
- Texas requires at least 12 days between your application or required notice and closing. Many transactions also include a federal 3-business-day rescission window.
Can I hold a HELOC and a home-equity loan at the same time?
- No. Texas allows only one Section 50 home-equity loan on a homestead at a time. If you already have one, discuss refinance or conversion options with your lender before you add new financing.
