Homestead Limits: Foreclosure

20 Oct Homestead Limits: Foreclosure

Occasionally I hear from someone who believes that a homestead affords some protection from mortgage foreclosure. This is not the case. Homesteads are subordinated to mortgages upon grant of the mortgage.

In Massachusetts and elsewhere, a homestead protects a home from forced sale for non-payment of most unsecured debts. So a homestead is a very good idea: if you are having problems paying credit card debts, for example, but can still pay your mortgage, your homestead can not be sold by a unsecured judgment holder to satisfy a debt that post-dates the mortgage.

Homesteads also protect home equity in bankruptcy. Note that the specifics of homestead law varies by state.

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