Section 4. In the absence of a valid declaration of homestead recorded under this chapter, an estate of homestead to the extent of the automatic homestead exemption shall exist in a home for the benefit of the owner and the owner's family members who occupy or intend to occupy the home as a principal residence. The homestead rights of non-titled family members shall consist of the right to use, occupy and enjoy the home as a principal residence. The estate shall be held subject to this chapter, except for sections 2, subsection (a) of section 3 and section 5.

In the event that spouses occupy or intend to occupy separate homes, then both estates of homestead together shall not exceed the automatic homestead exemption. The recording of a declaration of homestead under this chapter shall supersede the automatic homestead exemption provided by this section, but shall not terminate the automatic homestead exemption applicable to the period between the creation of the automatic homestead and the later recording of a declaration of homestead. If a superseding declaration of homestead on the same home is later invalidated or terminated, the estate of homestead provided in this section shall be reinstated as of the date of its original creation.

A homestead under this section may be subordinated to a subsequent new loan or line of credit; provided, however, that the new loan or line of credit: (a) is not secured by a recorded document; (b) does not exceed $20,000; (c) is exempt from the provisions of chapter 140D; (d) is evidenced by a written agreement executed by all record owners and their non-titled spouses for the purpose of subordinating the homestead as provided herein; and (e) contains a statement in substantially the following form, in boldface type and of a minimum size of 12–point font, ''I understand that homestead property is in many cases protected from the claims of creditors and exempt from judicial sale; and that by signing this contract, I voluntarily give up my right to this protection for this property with respect to claims up to the principal amount of the loan or line of credit provided under this contract.'' The subordination allowed in this paragraph shall not apply to credit card agreements or to any loan made in anticipation of a paycheck, tax refund or insurance settlement.