What is Homestead Exemption
A homestead exemption is a legal provision that helped thousands of families across every state. The homestead exemption can help eligible individuals to shield a home from creditors following a bankruptcy or the death of a spouse. This legal provision can also provide surviving spouses with property tax relief for multiple years. The property tax relief is done on a graduated scale for the benefit of homes with lower assessed value.
The homestead exemption is one of the most useful legal provisions and it can help prevent forced sale of a primary residence, but doesn’t prevent bank foreclosure if the homeowner defaults on the mortgage. The foreclosure will happen when the bank takes the possession of the home due to keeping up with the monthly payments.
How to apply for homestead exemption?
The application for a homestead exemption is done on a state or local government level. The law is different in every state, except for Pennsylvania and New Jersey which don’t have homestead exemptions. We highly suggest calling your local tax assessor to ask where to begin your application for a homestead exemption.
The eligibility requirements for a homestead exemption
The requirements for a homestead exemption vary by state. While some states have a limit on the assessed value of the property, some states have a limit on the size of acreage like Texas and Florida. The most common assessed value limit ranges between $30,000 and $500,000, with some states having a higher limit. It all comes down to the median house price in the state as well as the general cost of living.
While the assessed value of the property is likely to play a major role, the protection limits against creditors under homestead exemption is based on how much equity you have. Your protection limit is the assessed value of the property minus the balance of the mortgage. If your equity is less than the limit, the credit can’t force a sale of the property, but if less, creditors may force the sale. In case of a forced sale, the homesteader may get to keep a portion of the proceeds, depending on the equity.
