Question: I have a customer who has done a couple of different home improvement loans on their homestead with us over the last year.  They would like to combine them into one note and put them on a payout.  Can I just do a refinance combining them all into one note?  This would ultimately be a second lien.

 

Answer:  Refinances of liens against a homestead are specifically permitted by the Texas Constitution Article XVI, Section 50(a)(4).  However, you must not advance additional funds when you refinance the loans unless you are ready to comply with the home equity provisions in Section 50(a)(6), which would leave you with a home equity loan.  You can then advance additional funds for reasonable costs necessary to refinance the home improvement loans.  (See Section 50(e))

 

Here is the text of Texas Constitution Article XVI, Section 50(a)(4):

 

(a) The homestead of a family, or of a single adult person, shall be, and is hereby protected from forced sale, for the payment of all debts except for:

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(4) the refinance of a lien against a homestead...