For the first time since 2021, the markets are signaling an increase in home values and a decrease in interest rates. That means if you’re considering a Home Equity Loan or Cash Out Refinance, 2026 may be the best time to strike.
Rally Credit Union can help get you started with a few FAQs — and even connect you with a trusted lending expert when you’re ready to take the next step.
First off: does borrowing against my home equity make sense for me?
While it’s a common way to borrow, taking on a Home Equity or Cash Out Refinance loan does come with some risk. A big part of that decision is how you’re planning to spend the money.
One way to think about it: if your purchase provides lasting value, borrowing against your home may be a sensible option. If it’s something that depreciates or puts you in debt without the ability to repay, consider different lending options.
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What kind of loans are available?
Texas homeowners generally have two options: a Home Equity Loan or a Cash Out Refinance. While both allow you to tap into your home equity, they work very differently — especially under Texas’s unique lending laws.
OK. Tell me more about Cash Out Refinancing.
Cash Out Refinancing replaces your existing mortgage with a new, larger first mortgage, so you can take the difference in cash. For example: if your current mortgage is $250,000, and you want to borrow $50,000 — your old mortgage is replaced with a new one for $300,000.
Benefits:
- One loan, one payment
- If you bought high, you may be able to lock in a better interest rate and loan term
- Often lower rate than second-lien products like Home Equity Loans
Best for:
- Large capital needs, like home renovations or debt consolidation
- Borrowers who want to improve their rate, simplifying multiple debts into one loan
When to avoid:
- If your current mortgage has a low interest rate, refinancing in today’s higher-rate environment could result in significantly higher monthly payments
What about Home Equity Loans?
Home Equity is a second loan on top of your existing mortgage, usually with a fixed rate and term. To put it simply: Two loans. Two payments. Two rates.
Benefits:
- If you locked in a good rate originally, this keeps your original mortgage intact
- Fixed rate and predictable payments
- Often faster and cheaper to close than a Cash Out Refinance
Best for:
- Borrowers with a good interest rate on first mortgage
- Specific one-time expenses
- Shorter-term financing needs
Let’s talk about the math.
Whether choosing a Cash Out Refinance or Home Equity Loan, the 80% Loan to Value Cap applies to both in Texas. This rule means your loans (the original mortgage plus the new one you’re applying for) may not exceed 80% of the home’s value.
Example:
Let’s say you have a home appraised at $400,000. Your mortgage is for $250,000, and you’re applying for a $50,000 loan. Combined, your original mortgage and the new loan are $300,000.
Because $300,000 is 75% of $400,000 (your home value) – this is a viable loan option.
How to make the next move.
Still have questions? There’s a Rally Credit Union expert ready to help. In fact, Rally finances 1 in 20 homes in the Coastal Bend. If you’re ready to work with a Home Loan team that’s invested in your community and financial future, connect with an expert today.
