Legal Question in Real Estate Law in California

Re: Homestead Protection

A homestead recorded in the County in which your residence is located will protect any excess value of your home, over and above any loans you may have on the home, up to the maximum amount of your statutory homestead protection. In California that amount is $75,000.00 for a husband and wife, (unless one of you is disabled, over 65, etc., in which case it is $150,000.00). For example, if you have a house worth $500,00.00 and you have loans of $400,000.00 on that house, then your equity is $100,000.00, and $75,000.00 would be protected if you record a homestead. A disgruntled creditor is of concern only if he files suit, wins and gets a jdugment, in which case he could seek to satisfy that judgment out of the equity in your home. There is no tax impact, but every time you get a new loan, you will have to "release" the homestead, but you can then re-record it. Note: some people erroneously believe that it protects you from foreclosure by a lender from whom you have obtained a loan; it does not.

Re: Homestead Protection

In addition to the home equity protection given by a recorded declaration of homestead, you already have a so-called 'automatic homestead' in that California law exempts certain property, including some home equity, from execution and levy to satisfy judgments.

The overlap is sufficient to reduce and sometimes eliminate any advantage from filing a homestead. Also, in some situations, filing a declaration of homestead can be a red flag to creditors, plaintiffs, or other people you do business with, calling attention to your fears.

I'm not saying don't do it, just giving you the rest of the picture.