Legal Question in Real Estate Law in California

Re: Homestead Act Protection

The Homestead exemption is a tax issue only. You get a deduction if the property is your personal home. The mortgage company retains it's rights under the finance agreement. There is no free lunch in America. Pay on time all the time.

Dr. Michael Cortson

attorney at law

Re: Homestead Act Protection

The Homestead Act give you an axemption of a certain amount of money against a creditor regarding your primary residence. They could still force the sale of your home, but you would be allowed to retain a portion of the sale after deducting the mortgage. For example, if your house is worth $500,000, you have a loan of $300,000, and a judgement creditor forces the sale of your home, depending on the type of creditor, the exemption might be $75,000. You could keep $75,000 and the creditor the remaining $125,000 of the equity.

The Act has no affect on Federal Tax Liens.

Re: Homestead Act Protection

California has two types of so-called homestead protection: a so-called 'automatic' homestead technically known as the dwelling house exemption, and a declared homestead.

Both exempt the equity in a debtor's residence from execution by creditors up to an amount dependent upon the debtor's family circumstances and age. The exemption typically ranges from $50,000 to $100,000. Neither form of homestead prevents a creditor holding a lien such as a mortgage or deed of trust on the home from foreclosing. Further, general creditors can force the sale of the homesteaded property to reach equity in excess of the protected amount.

The bottom line is that the two mostly overlapping homestead provisions will allow the debtor-homeowner to salvage some cash from execution upon the property, but that's about it.