A Texas homeowner signs a home equity loan agreement that includes a provision requiring the borrower to pay a penalty if the loan is repaid early. Under the Texas Constitution, is this prepayment penalty provision enforceable?
Correct Answer
D) No, because the Texas Constitution prohibits prepayment penalties on home equity loans secured by the homestead
Under Texas Constitution Article XVI §50(a)(6)(G), a home equity loan on the homestead must not include a provision for a prepayment penalty or any other fee for prepayment. The borrower has the constitutional right to repay the loan in whole or in part at any time without penalty. This is one of the many consumer protections Texas provides for home equity lending on the homestead.
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More Tx Community Property Homestead Questions
A Texas married couple has been separated for two years but is not yet divorced. During the separation, the wife purchases a rental property using her earnings. Under the Texas Family Code, how is this property classified?
Under the Texas Family Code, which of the following situations does NOT require both spouses to join in the transaction?
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- → A couple marries in Texas after each owning their own homes for several years. Under the Texas Family Code, what happens to the homes they each owned before the marriage?
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- → A Texas homeowner defaults on a personal loan of $50,000. The creditor obtains a judgment and seeks to force the sale of the homeowner's primary residence to satisfy the debt. Under Texas homestead law, can the creditor force the sale?
- → Under the Texas Constitution, what is the maximum size of a rural homestead for a family in Texas?
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- → A Texas homeowner converts their homestead into a rental property and moves to another state. After two years, a creditor seeks to foreclose on the former homestead for an unpaid business debt. Under Texas law, can the creditor force the sale?
- → A Texas homeowner dies, leaving a surviving spouse and two minor children. The homestead property has a remaining mortgage balance. Under Texas law, what happens to the surviving family's homestead rights?
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Previous Question
A married couple in Texas decides to permanently relocate from their homestead in Dallas to a new home in Houston. They rent out the Dallas property but do not officially declare a new homestead. Under Texas law, when does the homestead protection on the Dallas property end?
Next Question
A creditor attempts to place a lien against a Texas family's homestead for an unpaid medical bill of $25,000. Under Texas homestead law, can this lien attach to the homestead?