Wednesday, 30 January, 2002
The Texas homestead law which until recently (1998 or so) prevented Texans from obtaining home equity loans, still prevents us from doing a cash out refinance using a normal mortgage loan. Although it's not required that you file a homestead, everybody recommends it when you buy a house because it protects your house from most liens and judgments. What they didn't tell me in 1995 was that filing a homestead also locks up my equity.
There's a way around the problem, but it's less than ideal. A bank here will write me a home equity loan that covers the mortgage plus whatever cash I want to take out, but the interest rate is less than ideal; ranging from 7.25% to slightly above 7.5%. Mortgage loan rates are 6.5% for fixed rate loans, and as low as 5.25% for adjustable rate loans. I could refinance the balance as a regular mortgage and then take out a home equity loan for the improvements. But that would entail two sets of closing costs (!), and the idea of paying $3,000 in closing costs for a loan of less than $50,000 just rubs me the wrong way.
What a mess.