Two Parts to Texas Homestead
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Posted by Bob3
(68.95.225.5) on July 08, 2004 at 03:37:44:
(Board acting up, this may appear twice) Texas has two distinct laws for designating a homestead. The Texas Tax Code offers homeowners a way to apply for homestead exemptions to reduce local property taxes. Application is made to the appraisal district and there is no fee for filing. The Texas Property Code allows homeowners to designate their homesteads to protect them from a forced sale to satisfy creditors. This law doesn’t protect homeowners from tax foreclosure sales of their homes for delinquent taxes. The appraisal district office is unable to answer questions concerning designation of homestead for protection from forced sale. The Texas homestead exemption began as protection for the wives and children of the early settlers in the event the man of the house was lured into a not-so-honest game of chance or decided he needed a few dollars more to continue a night out on the town. More seriously though, the wives and children of a deceased breadwinner were secure in their home(stead) and could not be removed because of some improper or manufactured claim of debt. (Bob: Sounds like a "debt buyer" or CA to me) As a state constitutional protection, it has withstood the test of time and remained virtually unchanged as we have moved from the 19th century through most of the 20th century. The practical protections of the homestead laws prevent any creditor (except for the mortgage holder, a taxing authority, or the holder of a note created for a home improvement loan) from forcing the sale of the homestead to satisfy nonpayment of a debt. It is difficult to "abandon" the homestead protection to borrow against its equity. An owner who wants to maintain property ownership and be able to borrow against its equity would have to move out of the property and demonstrate it is now being used as rental/income- producing real estate and that he or she has established a new homestead elsewhere. It is interesting to note that home equity loans were not available in Texas until the constitution was amended, effective January 1998. Home equity loans in Texas involve numerous restrictions and requirements that may not exist for such loans made in other states. The amount of a home equity loan plus the balance of the first mortgage may not exceed 80% of the value of the property, thus leaving a 20% equity cushion at the time of the second lien.
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