Homestead, Mechanic’s and Materialman’s Liens Series – Post #1: What’s the Deal with Homesteads?

What’s the Deal with Homesteads?

Texas has a complicated system of protections for the family “homestead.”  The Texas Constitution protects your home so that creditors can’t take it away and leave your family homeless.  But there are exceptions . . . the money you purchase or build a home with normally results in a lien or mortgage.  If that mortgage is not paid, it can result in foreclosure.  Additionally, some unpaid taxes (most notably, federal income taxes and property taxes) can result in loss of the home.  In more recent years, Home Equity Loans and Lines of Credit have become other ways to place a valid lien on a homestead.

Many people confuse their “homestead exemption” for property tax purposes with the Constitutional protection for a homestead.  They are completely separate things. The “homestead exemption” is a tax discount on the property you call home, while the protections under the Texas Constitution limit the ways creditors can access the equity in your home.

Because of the protections given to a homestead, there are only a few ways to borrow money against your homestead (we would call that placing a valid lien or mortgage against it).  Those are generally:  (1) to purchase it, (2) to construct it, (3) or take out a Home Equity Loan or Line of Credit.  It is also possible to mortgage your homestead to pay for property taxes and certain federal taxes.  But generally, other than the limited purposes above, if you owe a debt and even if you are sued for payment, it cannot result in a valid lien against your homestead.

Thinking about building a house or have some questions about papers you received about a lien against your house? Come see us or give us a call at (254) 300-7909. We’d love to help.