What Is Homestead Protection
Below is a MRR and PLR article in category Finance -> subcategory Mortgage.
Understanding Homestead Protection
Overview
Are you aware of how to safeguard your home if you're sued?What is Homestead Protection?
If you lose a lawsuit, the plaintiff may attempt to force the sale of your home to recover the owed money. Homestead protection makes this more difficult.Protecting Your Home Equity
Homestead laws help protect some of your home equity. Equity is the difference between your home's market value and what you owe on it. For instance, if your home is worth $350,000 and you owe $300,000, you have $50,000 in equity. A homestead can shield this amount.Types of Homesteads
1. Automatic Homestead
If you live in your home, you automatically have an automatic homestead. It protects a portion of your home equity until you sell. No paperwork is required.2. Declared Homestead
A declared homestead involves recording a legal form with the Registrar-Recorder’s office. It safeguards some equity for six months post-sale under these conditions:- You sell your home and buy another within six months.
- The protected amount is used for the new home.
- You record a homestead on the new property.
Only your primary residence qualifies for this protection.
Who Benefits from a Declared Homestead?
If you've lost a court case with a significant financial judgment against you, a declared homestead can offer protection. It preserves part of your sale proceeds for six months, allowing you time to purchase a new home and record another homestead.How Much Does a Homestead Protect?
Both automatic and declared homesteads safeguard the same amounts:- $50,000 for individuals
- $75,000 if living with at least one family member who has no interest in the property
- $150,000 for homeowners aged 65 or older, or if physically or mentally disabled
- $150,000 for those 55 or older, single, with annual income of $15,000 or less
- $150,000 for married couples with a combined income of $20,000 or less
Limitations of a Homestead
A homestead does not protect against:- Foreclosure due to unpaid mortgage
- Mechanics liens
- Judgments for child or spousal support
Filing a Declared Homestead
Here’s how you can file for a declared homestead:1. Obtain a declared homestead form from a stationery store or online.
2. Complete the form.
3. Sign and notarize the form.
4. Contact the Registrar-Recorder's office for filing fees and addresses.
Remember, companies helping you file cannot charge more than $25.
Understanding and utilizing homestead protection can help secure your home equity against certain legal threats, giving you peace of mind.
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