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Texas home equity and refinancing

Here's an interesting one for Texas experts.

Say an individual has a "regular" first mortgage (underwritten by Fannie Mae etc.).  Say the individual subsequently took out a Texas home equity, i.e. 50(a)(6), loan.

IF the individual were to refinance BOTH loans into a single loan, then I understand that the result MUST be a 50(a)(6) loan, since a Texas home equity loan cannot be refinanced to another type of loan.

BUT, say the 50(a)(6) loan had already been fully paid off.  So the ONLY mortgage existing at the time of refinance was the "regular" first mortgage taken out at purchase, and the amount refinanced equaled the balance of that first mortgage (NO cash back).

The question is, what type would the refinanced mortgage be?

I believe it would be a "regular" mortgage (and NOT a Texas equity loan), since it is NOT refinancing a Texas equity loan, nor is there cash back.  Any dissenting opinions?
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March 07 2009 - Dallas
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Answers (8)

its in the texas constitution. Once a cashout always a cash out.but if the cash out was a home improvement loan to pay off contractors and supplies. and the loan was closed properly by the title company. it isn't treated as a cash out. And can be taken above the 80% loan to value.
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August 31 2009
If the lien was released it will not show on title, and your refi will not be considered a cashout under TX law.
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March 18 2009
I would check with the title company and county tax office to make sure the lien is actually released. If it is, then you're ok.
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March 18 2009
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Ken, that is an interesting comment.  What about if the second lien holder (i.e. the one providing the home equity loan that was since paid off), had filed a release of lien with the county?  In that case there would be nothing to subordinate, right?
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March 17 2009
The first mortgage would be a Conventional Non 50 a 6, but you would still have a HomeEquity on title. If you decided to refi, you would need to see if the 2nd lien lender would subordiante the 2nd lien. Even though it's paid off, it's still attached to the property.
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March 17 2009
Profile picture for tetech2
Joe, actually I checked on this myself and it would be a conventional mortgage.

Your statement is only true to the extent that some part of a loan being refinanced WAS used for cash out.

Since the original was NOT cash-out, and ONLY that loan is being refinanced, the "once a cash out" part of the statement is not satisfied.

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March 17 2009
ONCE A TEXAS CASHOUT; ALWAYS A TEXAS CASH-OUT !!!  JOE
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March 17 2009
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March 11 2009
 
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