Texans overwhelmingly voted to give homeowners easier access to their home equity in November. The common sense reforms passed in Proposition 2 benefit both borrowers and lenders. Changes include:
- Removing the ban on home equity lending to agricultural homesteads.
- Lowering the 3% fee cap to 2% and excluding the appraisal, survey and title insurance fees from the fee cap.
- Allowing existing home equity loans to be refinanced as non-home equity loans.
- Eliminating the 50% ceiling for additional home equity line of credit advances.
Before Proposition 2 passed, home equity loans and lines of credit—especially for smaller amounts—were not available to many qualified homeowners due to the many restrictions put in place by the Texas Legislature.
With Texans voting to loosen these restrictions, home equity loans and lines of credit will now be more accessible. The amendment also creates refinancing options for homeowners who already have a home equity loan, allowing them to take advantage of better rates, interest and term options.
What the changes don’t do is create a free for all. Texas still has arguably the strongest consumer protection laws in the country, and elements like the 80% loan-to-value ratio remain unchanged.
According to Southside Bank CEO Lee Gibson, Proposition 2 will give banks like Southside the ability to better serve their customers. “People work hard to build equity in their home. They should have the ability to access part of that equity when needed. We’re excited to now be able to offer these loans to even more Texas homeowners with the passage of Prop 2.”
One of the key improvements is the reduction of the fee cap. This will allow lenders to make smaller home equity loans because in the past the appraisal fee, survey and title insurance fees alone would exceed the 3% cap. Those fees have now been excluded from the fee cap, making home equity loans viable for smaller amounts.
Now that home equity loans are available to more Texans, it’s important to understand what some of the more popular and practical uses for these loans are. Here are some of the most popular ways Texans use home equity loans:
- Funding home and property renovations.
- Financing college education.
- Consolidating high-interest debt.
- Purchasing a second home.
It’s important to consult with a reputable lender that is familiar not just with home equity loans but also with your market. Consider using a local, nimble community bank like Southside that can make quick decisions and that will also take time to work with you and address your concerns.
It’s a big step, and you deserve to be treated like a valuable partner, not just a number on a ledger!
The bottom line? You work hard to build up equity in your home. Now the Texas Legislature has made it easier for you to leverage it. Explore your options and consider a home equity loan!