Posted on: 09th Feb, 2007 12:02 pm
Why are Texas mortgages treated differently as compared to rest of USA?
Hi,
On which points do you think it is treated differently compared to other states?
David
On which points do you think it is treated differently compared to other states?
David
i_anurag,
i'm assuming you refer to the cash out restrictions in texas. if so, there isn't an easy answer or at least no answer that will make good sense to you.
basically the state of texas governs citizens by the state constitution which is not easily changed. the homestead act of the constitution governs what can and cannot be done on a homestead property (think primary residence). prior to 1997, you could not use the equity in your home for any purpose other than a qualified home improvement loan, payoff of state or federal tax liens, or payoff of an ex-spouse's equity interests.
the legislation which was presented and ultimately passed in 1996 was crafted in large part by the texas real estate commission and other realty interests. the result is that texans can borrow against their equity, but only up to 80% of the home's value.
equity is truly the difference between what something is worth and what you owe against it. if you have a home worth $100,000 and owe $65,000 on a mortgage you have $35,000 in equity. however, in texas, you must also determine "borrowable equity". to do this, multiply 80% of the value of $100,000 which gives you $80,000. then subtract what you owe from the $80,000 to get your borrowable equity of $15,000.
so while you may have equity of $35,000...you can only borrow $15,000 of it in a home equity loan.
part of the logic behind this legislation was fear that consumers would eat all of their equity and make it difficult for homeowners to pay full real estate commissions when selling their home. perhaps that is a conspiracy theory but it's been fairly well reported as being one of the concerns of those who crafted the legislation.
there are other provisions such as a 12 day waiting period, the inability to refinance a cash-out loan more than once in any 12 month period, and there are others.
if you were referring to something other than the cash-out rules please post back and i'll be happy to advise you if i can.
i'm assuming you refer to the cash out restrictions in texas. if so, there isn't an easy answer or at least no answer that will make good sense to you.
basically the state of texas governs citizens by the state constitution which is not easily changed. the homestead act of the constitution governs what can and cannot be done on a homestead property (think primary residence). prior to 1997, you could not use the equity in your home for any purpose other than a qualified home improvement loan, payoff of state or federal tax liens, or payoff of an ex-spouse's equity interests.
the legislation which was presented and ultimately passed in 1996 was crafted in large part by the texas real estate commission and other realty interests. the result is that texans can borrow against their equity, but only up to 80% of the home's value.
equity is truly the difference between what something is worth and what you owe against it. if you have a home worth $100,000 and owe $65,000 on a mortgage you have $35,000 in equity. however, in texas, you must also determine "borrowable equity". to do this, multiply 80% of the value of $100,000 which gives you $80,000. then subtract what you owe from the $80,000 to get your borrowable equity of $15,000.
so while you may have equity of $35,000...you can only borrow $15,000 of it in a home equity loan.
part of the logic behind this legislation was fear that consumers would eat all of their equity and make it difficult for homeowners to pay full real estate commissions when selling their home. perhaps that is a conspiracy theory but it's been fairly well reported as being one of the concerns of those who crafted the legislation.
there are other provisions such as a 12 day waiting period, the inability to refinance a cash-out loan more than once in any 12 month period, and there are others.
if you were referring to something other than the cash-out rules please post back and i'll be happy to advise you if i can.
