Sylvia owns a homestead in Houston, Texas, valued at $500,000. She has a first mortgage with a $300,000 balance. She wants to take a home equity loan and also a home improvement loan simultaneously. Under Texas Constitution Article XVI, Section 50, what is the maximum combined debt she can have against the homestead?
Correct Answer
D) $400,000 — because all liens combined cannot exceed 80% of the homestead's fair market value
Under Texas Constitution Article XVI, Section 50(a)(6)(B), the total of all liens against a Texas homestead — including the existing first mortgage, a home equity loan, and a home improvement loan — cannot exceed 80% of the homestead's fair market value. For a $500,000 property, the maximum combined debt is $400,000.
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Previous Question
A lender in Texas includes a prepayment penalty clause in a home equity loan agreement on a borrower's homestead. The borrower signs the agreement without noticing the clause. Under Texas Constitution Article XVI, Section 50(a)(6), what is the status of this prepayment penalty?
Next Question
In Texas, a deed of trust is the standard security instrument used in real estate financing. What role does the trustee play in a Texas deed of trust arrangement?