Homesteads - What they are, and how they work

By
Real Estate Agent with John Aaroe Group BRE #01708344
http://actvra.in/C2z

Homesteads - What they are, and how they work

California is one of the many states that have Homestead laws to protect the equity in an owner's primary residence.

There are two homestead statutes in California:

1. Articles 4 and 5 of Chapter 4, Division 2, Title 9
2. Part 2 of the California Code of Civil Procedure

A Homestead property is the primary residence occupied by a family that is exempt from the claims of, or eviction by, unsecured creditors.

A homestead exemption is a lien that protects a certain amount of equity in someone's home by limiting the amount of liability for certain debts that can be used against the home to satisfy a judgement.  The amount of equity protected varies depending on age, marital status, and income level of the property owner.

A homestead exemption does not stop the sale of the property.  A homestead exemption was designed to ensure that the homeowner receives the amount of the exemption before the creditors are paid from the sale proceeeds.

A homestead property can be sold if the sale proceeds are sufficient to:

  • Pay all outstanding liens on the property
  • Pay off all mortgages and loans secured by the equity in the home
  • Pay the selling costs of the home
  • Allow the homeowner to keep the amount of equity protected by the homestead exemption

Because homestead exemptions are subject to the general rule regarding liens that "first in time is first in right", they are not effective against prior liens, such as a purchase money deed, trust, or mortgage.  They are also not effective against tax liens, mechanic's liens, or judgement liens for child, family, or spousal support.

I'm a little curious.  I'm going to run it by one of my mortgage brokers to see what the scenario is when someone wants to refinance their property that has an existing homestead exemption.

close

This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Spam prevention

Accessibility option: listen to a question and answer it!

To submit the form,
drag the magnifying-glass to the circle on the side.

Type below the answer to what you hear. Numbers or words, lowercase:

Topic:
Lending / Financial
Location:
California Los Angeles County Santa Clarita
Groups:
"Whacked"!!!
LA Connection
EXPRESS WITH WORDS AT ACTIVERAIN
The Lounge at Active Rain
Realtors®
Tags:
los angeles real estate agents
ralph gorgoglione
what is a homestead
homestead exemption

Comments 14 New Comment

Ambassador
1,518,686
Christine Donovan
Broker/Attorney 800-610-7253 DRE01267479 - Costa M
Donovan Blatt Realty
Ralph - That's an interesting question regarding a refi. I wonder if it's covered in the loan docs.
June 04, 2012 10:32 PM
Rainmaker
568,777
Phil Leng
Phil Leng Team - Residential Real Estate Experts &
Keller Williams Eastside Market Center

Hi Ralph,

Interesting post.

And interesting question.

Am sure the answer will be the subject of another blog

PHil

June 05, 2012 03:41 AM
Rainmaker
312,685
Sandy Acevedo
RE/MAX Masters, Inland Empire Homes for Sale
951-290-8588

Hi Ralph, good explanation about  a topic I know exists in California, but one I don't encounter very much. 

June 05, 2012 09:05 AM
Rainmaker
230,227
Rob Spinosa
Marin Mortgage Broker
RPM Mortgage, Marin County, CA

I have never had a homestead exemption trip up a refinance here in California, however, I do recall that cash-out refinances are generally not permitted in Texas, another homestead state. 

June 05, 2012 09:20 AM
Rainmaker
116,676
Frank Iglesias
Atlanta, GA Real Estate Investor
Working With Houses, LLC - Atlanta Real Estate Investments

Good read.  Thanks for sharing.

June 05, 2012 10:13 AM
Ambassador
911,808

Ralph Gorgoglione

California Real Estate (800) 591-6121
Ask me a question
*
*
*
Spam prevention

Accessibility option: listen to a question and answer it!

To submit the form,
drag the printer to the circle on the side.

Type below the answer to what you hear. Numbers or words, lowercase: