Homestead is a property tax exemption term referring to a homeowner who occupies their own primary residence. When someone claims a homestead tax exemption on the property they own and occupy, they are entitled to receive up to a $120,000 exemption on the tax-assessed value of their property. Married couples who own and occupy the same residence can receive an exemption of $120,000 each ($240,000 total).
Homestead laws prevent creditors from going after your home if you cannot pay your debts. However, there are exceptions to these protections as follows:
- Creditors can still collect taxes you owe
- Creditors can enforce liens related to debts associated with homestead construction, improvements, or repairs
- Creditors can enforce mortgage liens
- Creditors can enforce condominium or HOA association liens filed under statute RSA 356-B
Creditors have the legal authority to sell a homestead property under a specific homestead statute RSA 480 if any of the above conditions apply. However, the creditors can only take enough proceeds from the property sale to cover the debts and liens owed. Any excess proceeds must go to the owner of the homestead, but only up to the maximum exemption amount. Since the full homestead exemption is $120,000, it is the maximum amount the homestead holder is entitled to receive, which extinguishes their right of occupancy.
Here is another example:
Suppose a married man owns a house but shares occupancy of the house with his wife. The man secures a promissory note by granting a mortgage, but the wife doesn’t waive her right to a homestead. In this case, the wife’s $120,000 homestead takes priority over the promissory note.
Assigning and Waiving Homestead Rights
Any party entitled to a homestead or possessing a homestead may assign or waive their right to a homestead. But certain circumstances have to present themselves to make any person want to assign or waive this right.
Going back to the previous example, let’s suppose the occupying wife (non-owner) sends a homestead waiver to the second mortgage lender. The wife still has the right to collect before the first mortgage lender because she never sent a homestead waiver to the first lender.
On May 3rd, 2019, The New Hampshire Supreme Court decided on a similar case called Sabato v. Federal National Mortgage Association.
In this case, Sabato was a married woman who solely owned a house she occupied with her husband. When she granted a mortgage to the first lender to secure a promissory note valued at $130,000, her husband never waived his homestead rights. After a couple of years passed, the wife granted a mortgage to a second lender to secure a note of $70,000. Her husband decided to waive his homestead rights to the second lender. The home was valued at $200,000.
The second lender foreclosed on the second mortgage to buy the house for $70,000 at a foreclosure auction. Then, this second lender turned around and sold the house to the first lender. However, even though the first lender was the new owner, the husband’s homestead still took priority. But it doesn’t take priority with the second lender because the husband waived his homestead rights to the second lender.
As a result, the second lender recovered $70,000 to satisfy the mortgage loan by taking $70,000 from the husband’s $120,000 homestead. This left the husband with a $50,000 homestead. So if the first lender wishes to foreclose on the property, they need to pay $50,000 to the husband since he never waived his exemption with them. The first lender can keep whatever proceeds are left afterward.
You can contact Alfano Law Office at (603) 856-8411 or at this link.