disadvantages of homesteading
Homesteading, also known as homesteading, is the practice of settling on a piece of land and building a dwelling on it. The main benefits of this practice are that you are protected from having your property taken away by a bank or credit card company. However, there are some disadvantages to this type of home ownership.
The first major disadvantage is that you may not be able to use your homestead to save for retirement. You could lose your home to foreclosure, or to bankruptcy, or to the IRS if you don’t pay taxes on your home. If you have any credit card debt, your creditor can garnish your wages or take legal actions to collect on a judgment.
Another disadvantage of homesteading is that you are cut off from the modern world. Many people are not able to have access to instant phone service, groceries, or even to take care of themselves if they are sick or injured. There are many advantages to homesteading, but not everyone will benefit from it.
What are the disadvantages of homesteading?
Besides the economic advantages, there are also numerous social advantages to homesteading. In the early 19th century, the Homestead Act encouraged migration into the West. This act provided a path for settlers from the East Coast and other areas to settle in the West. African Americans, European immigrants, and famine-struck Indians all found their way to the land.
Homesteading also created a distinct culture in the West. Communities grew quickly and flourished for a short time. But the influx of migrants brought with them a volatile racism that forced many blacks to migrate to the Midwest or to the South. While the newcomers were enthralled with the possibility of living off the land, they had little experience with farming or acquiring prime agricultural land. As a result, they were often unsuccessful.
A second disadvantage is that a homestead designation only applies to the primary residence of the declarant. This means that the designation does not protect your vacation home or rental unit. And it also does not apply to Medicaid protection.
It is also important to note that a homestead designation does not prevent a bank from foreclosing on your property. If your lender tries to sell your property, it will have to first file for a lien and then seek court approval to do so. That can hinder your ability to refinance or purchase a new home.
Some states offer exemptions to protect your home from bankruptcy and tax collection. The IRS also offers its own set of homestead exemptions for delinquent tax payers. Depending on the state, a homestead can be exempt from up to 50% of the assessed value of the property. Other states require you to record a homestead exemption before filing for bankruptcy.
Even though the Homestead Act was a huge help for the settlers in the West, it was not the only source of support for them. Various railroads were expanding into Western territories. This caused a strained relationship between the railroads and the farmers. Railroads sometimes received the most agriculturally viable land. Later, they would resell it for high prices. Consequently, land along the railroad lines was often snapped up by land speculators.