Legal Question in Real Estate Law in California

Re: Homstead in California

There isn't any law that says you have to (as far as I know, but it might be a V.A. policy or rule). More likely than not, it is a lender request or lender policy.

Look at it this way. The current homestead was probably recorded after the current loan, thus the loan is "senior" to the homestead in packing order in the event of a foreclosure.

If you refinanced, the new loan would be recorded at a later date, so it would be "junior" to the declaration of homestead. The proposed lender may be willing to offer you a better rate, or maybe won't lend at all, unless it is in first position. So, it may want you to remove the homestead in order to get ahead of it, then you could re-file the homestead.

As I see it, doing it the lender's way should make no difference to you - and doing it your way ought to make no difference to the lender, either - for the simple reason that a homestead affords no protection against a voluntarily-created lien, such as a mortgage. So, it shouldn't make any difference to either borrower or lender -- but lenders have their silly preferences, so do it their way if they insist.

That's my guess based on the facts given. You might want to ask the lender itelf why it makes any difference to it.