What Is Waiving Homestead Rights?
Waiving of homestead rights is an agreement between a borrower and lender to waive the homeowner’s statutory homestead rights under state law, according to US Legal. Homestead rights protect a homeowner’s equity from creditors in cases of default. Typically, homestead waivers apply to residential mortgages and homeowners association contracts.
The homestead rights protect a homeowner from the seizure or forced sale of his home to pay debts, states US Legal. The statutory protection applies to all debts, such as credit cards, medical bills, personal loans, bankruptcy and lawsuits for accidents. Many homeowners associations require property owners to agree that the association’s lien on a property is superior to the homestead exemption provided by state law. Homeowners wishing to use the homestead exemption to protect their equity and prevent forced seizure of their homes by creditors must record a Declaration of Homestead. The Declaration of Homestead applies to debts that are not subject to a signed waiver.
Banks include homestead waivers in residential mortgages in order to reserve their right to collect the full amount of the outstanding loan balance in foreclosure cases, explains US Legal. Some states allow for the protection of a specified amount of homeowner equity. Other states have no limit.
