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How Do I Use My Home Equity to Buy an Investment Property in Carrollton?

Most owners borrow against their home with a HELOC or a cash-out refinance, then use that money as the down payment on the rental. In Texas, the rules depend on which property you borrow against. Your homestead falls under strict limits in the Texas Constitution, including an 80 percent cap and a 12-day wait. A rental you already own doesn't, and the lender's guidelines take over.

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One note first: I'm a real estate agent, not an attorney, tax advisor or lender. Get your actual terms from a licensed lender and take tax questions to a CPA.

How much can I pull from my homestead?

Start with 80 percent. Article XVI, Section 50(a)(6)(B) limits the new loan plus all other debt secured by your homestead to 80 percent of fair market value on the day the loan is made. On a HELOC, the test uses the maximum line amount, so the full line counts even if you never draw it.

Here's a hypothetical. Your home appraises at $500,000 and you owe $260,000. Eighty percent of value is $400,000, so the most Texas law allows is $140,000 in new debt. A lender can offer less.

Now the purchase side. The median sold price in Carrollton was $425,000 over the six months ending around October 3, 2026, based on 602 closings one market site tracked. Conventional guidelines allow as little as 15 percent down on a one-unit investment purchase and 25 percent on two to four units. Fifteen percent of $425,000 is $63,750, before closing costs and reserves.

Which Texas rules apply to my homestead but not a rental?

Section 50 covers homesteads. If you borrow against yours through a HELOC, home equity loan or cash-out refinance, expect these limits:

• 12-day wait. You can't close before the 12th day after the later of your application or the lender giving you the required notice.
• Three days to cancel. You can rescind within three days after the loan is made, so build that into your purchase timeline too.
• Once a year. A new 50(a)(6) loan on the same homestead can't close before the first anniversary of the last one, with narrow exceptions like a declared state of emergency in your area.
• One at a time. A 50(a)(6) loan can sit alongside debts like your original purchase loan, but not another 50(a)(6) loan. If your first mortgage is already a Texas cash-out, a HELOC can't go on top of it.
• Fee cap. Most fees can't exceed 2 percent of the original principal. Interest, bona fide discount points, third-party appraisals, surveys and certain title charges fall outside the cap.
• Home only. The lender can't take other property as added collateral, so your rental can't back this loan.
• Closing location. It must close at the lender's office, an attorney's office or a title company.

None of those limits are written for a true rental, since Section 50 protects homesteads. For a rental you already own, the lender's guidelines set the limits instead. Conventional cash-out caps at 75 percent of value on one unit and 70 percent on two to four. Fannie Mae also generally requires six months on title, and an existing first mortgage has to be at least 12 months old. A lender may ask you to sign an affidavit naming your real homestead.

Is a HELOC or a cash-out refi better for buying a rental?

A HELOC leaves your first mortgage alone. You draw when you need it, which suits a property search with no closing date yet. In Texas, each draw must be at least $4,000, and you can't use a credit card to pull money. HELOC rates are usually variable, and payments can jump once the draw period ends. Open it before you shop, since the wait and cancellation window can't be rushed.

A cash-out refi replaces your whole first mortgage with a bigger one, usually at a fixed rate. That's the catch if your current rate is low. Say you owe $260,000 at a made-up 3.5 percent, about $1,168 a month in principal and interest. Add $64,000 and refinance $324,000 at 7.24 percent, Freddie Mac's October 29, 2026 average, and it's about $2,208. That's roughly $1,040 more each month to pull $64,000. Your quote will differ.

A cash-out can make more sense if your rate is already near today's or you want one fixed payment. Fannie Mae's Texas 50(a)(6) rules are stricter than the general ones: first lien only, 80 percent maximum, a new appraisal, and no HELOC behind it.

What will lenders want before approving the rental?

Borrowing the down payment doesn't get you around underwriting. Using Fannie Mae's guide as the conventional benchmark:

• Borrowed down payment. Funds secured by an asset, including real estate, are acceptable, but the monthly payment counts as debt in your ratios.
• Reserves. Automated approval requires six months for an investment property, plus more if you have other financed properties.
• Rent. On a purchase, the lender counts 75 percent of gross rent, then subtracts the property's full payment. With a made-up $2,600 rent, it counts $1,950.
• Experience. With under 12 months managing rentals, positive rental income can only offset that property's payment.

Want a HELOC on a rental you already own? Those are harder to find. Experian said in April 2025 that not every lender offers them and that scores around 720 or higher are typical.

Check the Carrollton details too. The city spans Dallas, Denton and Collin counties, so confirm the appraisal district and school district for the address. A rental doesn't get the residence homestead exemption, so run taxes without it. Carrollton also has a single-family rental registration program, so ask Code Enforcement what currently applies.

Looking at a Carrollton rental and want to work through it? Call or text Ben Jimenez at 469-730-6895.

AI-assisted research and drafting, reviewed and approved by Ben Jimenez before publishing.