Pledging Homestead Land for Non-Homestead Land

Underwriting & Legal

Pledging Homestead Land for Non-Homestead Land

May 13, 2018

Can you please clarify Newsletter No. 16-10 which asked this question: “When someone owns a rural homestead and they are purchasing more land that will also be homestead can they put a lien on their existing homestead as additional collateral?”  What if the property being purchased will NOT be homestead property. In that situation can the borrowers pledge their existing homestead as additional collateral?

Your question poses a “distinction without a difference.” The answer is the same regardless whether the property being purchased will be homestead.

A homestead can be mortgaged only for the types of debts set out in Art. XVI, Section 50 of the Texas Constitution.   One of those types of debt is for “(1) the purchase money thereof, or a part of such purchase money . . . ”.

So, although a lien for purchase money is a valid homestead lien, the purchase money must be for the purchase of the homestead burdened with that purchase money lien and not for the purchase of any other land.