What is the difference between a home improvement loan, and a Texas Cashout or Texas Cash-Out Mortgage?
You have been talking to your lender and there is a chance they got you into a sticky situation by not researching the difference, or maybe you have just been listening to them talk about it, and mortgage language mine as well be Martian Language. There is a difference between a home improvement loan and Texas Cash-out, and you need to know. (there are many reasons WHY you need to know, and you can call me if you are concerned, but below I’m just explaining the actual difference)
Here are the difference of a TRUE Home Improvement Loan vs Texas Cashout in layman’s terms:
- Texas Cashout Home Loan– If you used the equity from your home to pay down debt (credit card, car loan, student loan, pay day loan, etc.) or you received a check upon refinancing to do with the money what ever you wanted essentially. This was a Texas Cash-out Home Loan and now anytime you use your home for lending purposes, the title company will show a document that says your house falls under this guideline. The terminology we use in the industry, “once a cash-out always a cash-out”. You’ll never be able to borrow against your property more than 80% of it’s appraised value…this is a Texas Law.
- Home Improvement Loan– this is a loan typically taken out against a home after the home is already built and moved into where the money actually taken out, NEVER TOUCHED THE HANDS OF THE HOME OWNER. If you were adding a pool to the home, the title company or bank wrote checks directly to the pool company putting in the pool. If you were building a wing onto your home and increasing the square foot of your home, the title company or bank send the building contractors draws of money for the work. This would be a TRUE Home Improvement Loan
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Shannon says
If I am doing a cash out refinance in Texas, does all documents say Home Equity Note, etc? I was told that a cash out refinance in Texas has documentation that says it’s a Home equity loan?
Jill says
We started the cash-out refinancing process in November of 2017 because of the complications of a lean we were not aware of the loan has taken much longer to complete than normal. At first they told us we were at a 80%Texas A6 restriction and now that its 2018 they say its changed to 75% LTV which means we are getting 5 grand less then what we were initially told. Is this now accurate for 2018 I just want to double-check.
Jill
Spring, tx
Brad Lynch says
Jill,
The law has not changed as far as the 80% rule goes…there were changes in the program, but not that. On the other hand, there might be something in your file that might be limiting you. I can’t think off hand what it might be. The law hasn’t changed, so I would just ask your loan officer to be very specific to why your loan to value is being limited. There is a chance that maybe he made a mistake pricing the loan or something and isn’t being up front with you. More times than not, it’s our clients misunderstanding in situations like this that make then wonder like you are doing, but there are a LOT of loan officers out there that aren’t 100% straight forward. There are a LOT variables that go into play and a lot of mortgage jargon that the everyday consumer doesn’t understand, so this is the cause of misunderstanding. Let me know if you need more help. Please email me directly though at blynch@pnlending.com
Thanks,
Brad Lynch
Loan Officer
Edgar Quevedo says
I refinanced my house and I got some cash out. Now I tried to get an equity loan but as you comment above, the title says that there is an equity with the mortgage. Is there a way to remove that?
Brad Lynch says
Edgar, thanks for your comment. You can do an a(6) conversion loan…they just put this new program into law this year. As long as it’s been over 12 months, you can now refinance this w/out it being a cashout and you can then go over 80% loan to value. Hope this answers your question.
Brad