Extracting Equity In Texas (or anywhere)

I was inquiring with my bank about getting a home equity loan, and in TX we are limited to only 80% on our homestead, 90% on other property, as I understand it. Maybe I am misunderstanding the loan officer at my bank but she explained to me the way that they qualify your property for an equity loan.

basically, my house comps out at \$180k, my note is \$150k…

according to the bank, they take the average sale value (comp) and multiply it by 80%, then start with that number, subtract your outstanding note(s) and there is your available equity. doing it this way, i have no equity! \$180k x 80% = \$144k – note is \$150k OUCH!!!

they way i always understood it is this way: take your average sale value, minus note(s), there is your equity, mulitiply the equity by 80%, there is your available equity. this method gives me about \$30k in equity. \$180k - 150k note = \$30k equity x 80% = \$24k avail…

if my house comps out at \$180k, my note is \$150k, what am I missing here? Anyone in TX (or anywhere) care to enlighten me on this question?? i do not have experience in extracting equity. also, how would an investor be able to get any capital out of properties if the banks use the first method? they’d have to have a lot more equity available than what i always thought!

My broker said essentially the same thing to me a couple years ago.

Take the value of your home and multiply it by 80%. That is the max amount you can borrow on your homestead in Texas. The bank is not saying you don’t have equity, what the bank is saying is that you don’t have access to that equity above 80% LTV. The way you are calculating your equity is not how the state of Texas mandates it to be calculated. Using your calculations you would be at a 96.6% LTV. The 80% rule only applies to homesteaded or owner occupied properties. Second homes and investment properties are only limited by the LTV allowed by the lender.

my bank said 90% on other properties…you know, it’s ironic how protective TX is on our homesteads, but don’t pay your property taxes and who gets the house? kinda hypocritical lol

I agree. I for one am not in favor of the 80% rule. Also, for being protective of our homesteads Texas sure does allow for a quick foreclosure and NO redemption period. 90% is the max for my company as well. 80% with no seasoning.

Just a warning - getting an equity loan in Texas has been hellish. I have never had such a hard time getting a loan. I am going through Countrywide but for some reason nobody seems to know all of the requirements, so the loan has just taken forever. I had even stopped the process at one point and they convinced me to continue and made all of these promises, well now it has taken even longer than the first time. I have done loans with them bedore without a problem - the problem seems to be that it is a “Texas homestead loan.”

REI

The reason for all your trouble is that you are going through Countrywide. The only people that work at Countrywide who know what they are doing are the wholesale reps that work only with brokers. Everyone else there is just an order taker. The person who is handling your file may have been a furniture salesman a month ago. My best friend works at Countrywide and he says the turnover is so high there that they are just hiring anyone who walks in the door to answer the phones. A texas equity cash-out is just a regular loan and should not be any more difficult to do than a normal loan with the exception of the 12 day waiting period and a couple of extra forms to be filed. I would be interested to know why you chose CW. Did they offer you a killer rate, or was it the closing costs?