A home equity line of credit (HELOC) enables a homeowner to secure a low interest line of credit using their home’s equity as collateral. In other words, a HELOC allows homeowners to borrow against their home’s value minus the amount their lender owns.
Homeowners in Texas may use a HELOC for a variety of purposes. The advantage of HELOCs is that rates are often much lower than personal loans and credit cards. If you have a large purchase or investment that you need to finance, a HELOC can be a smart financial strategy.
Keep reading because we explore Texas laws revolving around HELOCs and which lenders offer the best HELOC rates to homeowners.
Table of Contents
Skip to Section
About HELOC rates in Texas
Living in Texas does not significantly affect HELOC rates. HELOC rates are influenced by a variety of factors, such as:
- Federal funds rate
- National and international economic conditions
- Value of the home
- Amount of equity in the home
- Income
- Debt-to-income
- Credit score and history
One of the most important actions Texas homeowners can take to save money on a HELOC is to shop around. Lenders strive to be competitive with one another and offer similar interest rates, but homeowners can save money by rate shopping and comparing lender fees.
Texas has specific laws for home equity loans and HELOCs:
- A HELOC cannot be used to purchase another home
- Homeowners cannot get two HELOCS within 12 months of one another and may only have one home equity loan at a time
- Homeowners must wait 12 days after applying before closing on a HELOC (known as the “cooling-off period”)
- Homeowners can only borrow 80% of the home’s combined loan to value—meaning all mortgages on the home cannot exceed 80% of the home’s value
- Each advance must be a minimum of $4,000 up to the credit limit
- Interest on a HELOC may be federally tax-deductible if the money is used to improve the home
“Texas laws are more strict than other states in an effort to protect homeowners,” says Chloe Moore, CFP®. “These rules can help ensure that homeowners do not borrow too much equity, which could result in a financial hardship or negative equity in the event of a market downturn.”
The best HELOC rates in Texas
When comparing HELOC lenders to find the best rate, Moore recommends also considering fees and time to close. Here are three of the best options we found in Texas.
| Product | APR in Texas | |
| Spring EQ | HELOC or home equity loan | Not disclosed |
| Bethpage FCU | HELOC | Introductory rate starting at 6.99% APR, followed by minimum variable rate of 8.5% |
| Truist | HELOC | Up to 18% |
Spring EQ: Best for multi-product application that lets you see HELOC and home equity loan offers
LendEDU rating: 4.3 out of 5
- Average closing time of 21 days
- Repayment terms up to 30 years
- Digital forms for easy application
If you want to access a HELOC in Texas quickly, Spring EQ is a strong option. The average closing time is 21 days, but you may even be able to tap into your funds within 14 days (which still meets the required 12-day cooling-off period in Texas).
Plus, Spring EQ offers instant qualification so you know how much equity you can use and what type of rate you qualify for.
We also like Spring EQ because you can compare options for either a home equity loan or a HELOC. That way you can make a solid decision based on two financing structures.
- APR: Not disclosed
- Loan amount: Up to $500,000
- Minimum credit score: 680
- Repayment terms: Up to 30 years
- Fees: Appraisal fee, loan origination fee, and an underwriting fee
Bethpage FCU: Best credit union
LendEDU rating: 4.2 / 5
- Low introductory rates
- Variable HELOCs may convert to a fixed-rate loan option
- 6 to 10 weeks to close
Bethpage Federal Credit Union works for a range of Texas homeowners because loan amounts can be as small as $10,000 or as high as $1 million. Plus, you can start with an introductory APR of just 6.99% for the first year before a variable rate applies.
Closing times can take between six and 10 weeks, which is slower than many other options. But you don’t have to worry about paying any fees to Bethpage FCU. And once your rate becomes variable, you have the choice to convert it to a fixed-rate loan option at no charge.
- APR: Fixed rate of 6.99% for the first 12 months for borrowers with VantageScores of 720 or more; then a variable rate starting at 8.5%
- Loan amount: Up to $1 million
- Minimum credit score: 670
- Repayment terms: 5, 10 or 20 years
- Fees: No fees
Truist: Best for varied repayment terms
LendEDU rating: 3.4 / 5
- Choose from 5, 10, 15, 20, or 30 year terms
- Maximum APR is 18% in Texas
- Pick either variable or fixed interest rate
Truist is a national bank with a physical presence in the Houston, Dallas, Austin, and College Station areas. However, the application can be completed online. From there, it takes up to 35 days to close on your HELOC.
Truist will pay your closing costs as long as you keep your HELOC open for at least three years. Otherwise, you must reimburse the bank for any costs they paid on your behalf. You’ll find a variety of terms lengths so you can customize the repayment period to suit your needs.
Truist offers several interest options. Choose from a fixed rate, variable rate, or an interest-only payment option (which is also a variable rate).
- APR: Up to 18% (fixed or variable available)
- Loan amount: Starting at $15,000
- Minimum credit score: Not disclosed
- Repayment terms: 5, 10, 15, 20, or 30 year terms
- Fees: Fixed rate setup fee ($15); no annual fee; other closing costs may apply
How your HELOC rate affects your overall loan cost
A HELOC rate is the cost of borrowing and affects the total cost of the loan and the monthly payment.
For example, imagine you take out a $100,000 HELOC with a 10-year term. See the difference in monthly payment and total cost with an 8% interest rate vs. a 9% interest rate.
| 8% interest rate | 9% interest rate | |
| Monthly payment | $1,213 | $1,267 |
| Total loan cost | $145,560 | $152,040 |
While the difference between the loans is only one percent, the homeowner would pay $6,480 more with a slightly higher rate.
How to get the lowest HELOC rates in Texas
The biggest eligibility requirement to note in Texas is that you can only borrow 80% of the home’s combined loan-to-value. If you know a general ballpark of your property value, your current mortgage balance plus your new HELOC can’t exceed 80% of that number.
All lenders consider your personal credit score when determining your eligibility for a HELOC in Texas. If you have a high credit score, you’ll qualify for a lower rate. A lower credit score means you’ll pay a higher interest rate.
“The minimum credit score required to qualify for a HELOC varies by lender,” says Moore. “Generally, if you have a credit score of 700 or higher and meet other requirements, such as a low debt-to-income ratio, you should qualify for a lower interest rate.”
No matter what your credit score is, it’s smart to shop around and compare multiple lenders. In addition to different interest rates, you can also choose from different repayment term lengths. You can also explore fixed and variable rate options or interest-only payments.
How to apply for a HELOC in Texas
Applying for a HELOC in Texas starts with comparing multiple lenders. You can usually prequalify to see what kind of rate and terms you’re eligible for. Then it’s time to submit a formal application. Expect to provide the following details:
- Address verification
- ID
- Name, birthday, and Social Security number
- Employer name and address
- Pay stubs, W-2, and/or tax returns
- Bank statements
- Property tax bill
- Mortgage statement
- Homeowners insurance declaration page
Once approved, the state of Texas requires homeowners to wait at least 12 days before closing. That way you have plenty of time to consider the HELOC terms and change your mind if necessary. During that time, the lender may also order an appraisal to confirm the value of your home.
FAQ
What is the lowest HELOC rate in Texas?
The lowest HELOC rate in Texas depends on the borrower and the lender. Homeowners should always shop around and compare rates and fees between lenders to save the most money on their HELOCs.
What HELOC has the highest rates in Texas?
HELOC rates are influenced by economic conditions, the homeowner’s personal financial history, and the lenders themselves. No one lender can be said to have the highest rates in Texas. To avoid high interest rates, homeowners should always rate shop before choosing a lender.
What is the current average HELOC rate in Texas?
HELOC rates are influenced by the federal funds rate and the borrower’s credit history, as well as national and international economic conditions. As a result, rates fluctuate daily, so you will want to compare lenders once you’re ready to take out a HELOC.
Will my Texas HELOC have insurance requirements?
A Texas HELOC does not require mortgage insurance because it is not a traditional mortgage. It is, on the other hand, often required for conventional loans and FHA loans.
Do any lenders not offer HELOCs in Texas, and why not?
Because Texas places restrictions on how HELOCs can be used within the state, some lenders may choose not to offer HELOCs. However, even with state regulations, Texans can find HELOCs with many lenders.
