Quote:
Originally Posted by cashybum
In Texas, you can not borrow against your home's equity in any way if your property has a "special use valuation" for property tax purposes... aka "Ag Exemption". You can do a rate and term refi only.
Can you still get a mortgage to buy out a co-owner if the property is ag exempt? My ex husband and I were co-owners of a property with my parents. When our divorced was finalized, he signed a quit claim deed. The mortgage was in his name only. We now need to secure a new loan. We have a large amount of equity in our property and we were hoping to get cash out to make some improvements to our ag business. Since Texas law prohibits this, would my parents be able to to buy out my share in the property with a new loan in their name only?
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1. A quit claim deed can also operate to transfer property interests in Texas. You've left out more than a few details. Did he "quit claim" his interest in the property to you, to your parents, to you and your parents, or did he simply claim he wasn't claiming an interest in the property any more?
2. You state the "mortgage was in his name only". A mortgage is a type of security interest. Texas doesn't really utilize "mortgages". The security interests used here are deeds of trust. But perhaps you were referring to the note instead of the security instrument? Typically both of you (husband and wife) or perhaps even all of you (husband, wife, and all other owners) would be on the deed of trust even if only your husband was on the note. Did you mean your husband was the sole borrower? As a practical matter in a divorce it does not matter whether one spouse or the other was the sole person on the loan. It's important to re-finance to remove the spouse who is giving up their interest from having any further liability under either the note or the security instrument.
3. Who is "we"? You and your ex-husband? You and your parents?
4. Constitutional amendments authorizing home equity loans to be secured by agricultural property passed about a week ago. Unfortunately most folks don't realize those amendments were pushed by the banking industry because they mostly wipe out defenses to home equity loans. In other words, if you take out a new home equity loan after the effective date of the constitutional amendments then you will have fewer constitutional protections than you did previously. The reality is that despite the prior prohibition, banks were encouraging people to borrow more money and securing the debt with unlawful liens on agricultural property. Up until two Texas Supreme Court decisions last year, the banking industry was relying on financial institution-friendly federal courts to deprive Texas homeowners of their constitutional rights under the Texas Constitution by preventing homeowners from challenging the validity of invalid home equity loans more than 4 years after origination. After the Texas Supreme Court said there is no statute of limitations on such challenges, the banking industry set out to eliminate the home equity loan restraints that they routinely violated. The constitutional amendment makes future loans that would be invalid liens under those Texas cases valid by eliminating constitutional restraints on such loans. You can bet there will be a push for re-financing to get homeowners into loans pursuant to the new provisions.
In short, if I understand your question, Texas law no longer prohibits what you are referring to but there are not sufficient facts presented to indicate whether you or your parents can obtain a home equity loan. In your case, assuming the property qualifies for a home equity loan you should be able to use the value of the entire property now for purposes of borrowing up to 80% of its equity.