What is the difference between a home improvement loan, and a Texas Cashout or Texas Cash-Out Mortgage?
You have been talking to your lender and there is a chance they got you into a sticky situation by not researching the difference, or maybe you have just been listening to them talk about it, and mortgage language mine as well be Martian Language. There is a difference between a home improvement loan and Texas Cash-out, and you need to know. (there are many reasons WHY you need to know, and you can call me if you are concerned, but below I’m just explaining the actual difference)
Here are the difference of a TRUE Home Improvement Loan vs Texas Cashout in layman’s terms:
- Texas Cashout Home Loan– If you used the equity from your home to pay down debt (credit card, car loan, student loan, pay day loan, etc.) or you received a check upon refinancing to do with the money what ever you wanted essentially. This was a Texas Cash-out Home Loan and now anytime you use your home for lending purposes, the title company will show a document that says your house falls under this guideline. The terminology we use in the industry, “once a cash-out always a cash-out”. You’ll never be able to borrow against your property more than 80% of it’s appraised value…this is a Texas Law.
- Home Improvement Loan– this is a loan typically taken out against a home after the home is already built and moved into where the money actually taken out, NEVER TOUCHED THE HANDS OF THE HOME OWNER. If you were adding a pool to the home, the title company or bank wrote checks directly to the pool company putting in the pool. If you were building a wing onto your home and increasing the square foot of your home, the title company or bank send the building contractors draws of money for the work. This would be a TRUE Home Improvement Loan