A lien is a legal claim on your property, often placed due to unpaid debts. In this case, a lienholder can seize the property and sell it to recoup their money. When you opt for a mortgage, you sign up for a voluntary lien by default.
In the US, the overall mortgage delinquency rate is 2.8%, which is nearly an all-time low. This means you can go for a mortgage without much worry. However, it is always the best idea to go through a pre-approval process.
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What Is a Lien?
A lien is a legal right that grants the lender the authority to take possession of your property. This happens if you do not repay the loan. Until the lien is paid off, you may face trouble refinancing or selling the house.
In addition, the lenders may also foreclose on the property if the debt is not paid. Thus, it is always the best choice to make timely payments on all your debts.
What Are the Different Types of Liens?
Here are the main types of liens:
Mortgage Lien
It is a common type of lien placed on a property by the mortgage lender. It secures the lender’s interest, giving them the right to take ownership if the loan isn’t repaid. The lien stays on the property until the mortgage is fully paid, at which point it’s removed, and full ownership is transferred to the homeowner.
Mechanic’s Lien
It is a formal claim that suppliers and contractors make when they do not receive payment for their work on a property. This lien ensures that the dues are paid to the people concerned. If you have a mechanic’s lien on your property, your financing options may be limited.
Tax Liens
A tax lien is a legal claim that the government places on property because taxes have not been paid. This signifies the government’s right to pursue the overdue taxes, most likely using foreclosure. It becomes risky to purchase a house if there is a tax lien involved with it.
Judgement Lien
When a creditor files a lawsuit against a debtor for nonpayment, the court imposes this lien. This enables the creditor to take possession of the debtor’s assets to recoup the owned money. If you come across a property with a judgment lien like child support or bank lien, connect with your agent to determine the best course of action.
HOA Lien
It is a lien placed by a homeowners association on a property when the owner fails to pay HOA fees or dues. It can affect property sales as the liens must be resolved before the property can be transferred to a new owner.
How Does a Lien Work?
A lien legally protects the lender’s investment. It gives the lender the right to seize the property if the borrower defaults. A property can have multiple liens, depending on the number of debts.
However, liens come into action only when you default on your monthly mortgage payments. There are two ways in which liens come into force: voluntary and involuntary.
Voluntary
When you get a mortgage, you agree to a voluntary lien by default. This allows the lender the right to seize your property if you are unable to repay. You can remove the lien after paying the debt in full. Voluntary liens do not adversely affect your credit as long as repayment terms are satisfied.
Involuntary
By contrast, involuntary liens are third-party claims on your property. In this case, the lender goes to court when you fail to repay their debt. The court places involuntary liens on your property without your consent.
Involuntary liens hurt your credit score and they impact your ability to obtain future finances. Involuntary liens get eliminated once you repay the lender.
How to Remove a Lien?
Here are some simple steps to get rid of a lien:
- Pay Off the Debt: Settle the debt by paying the full amount. Once the creditor receives the payment, they must remove the lien.
- Contest the Lien: Challenge the lien if there are errors or disputes over the amount. Consult with a lawyer to resolve the issue.
- Negotiate a Settlement: If paying the full amount is difficult, negotiate a payment plan with the creditor. Once the plan is completed, the creditor will remove the lien.
Do Liens Have Serious Implications?
Yes! Liens may present obstacles and limitations. However, you can avoid a lien and even remove it, if you are aware of the know-how. Make regular payments on your legal obligations to avoid or remove a lien on your property.
A lien is a legal claim on a property to secure payment of a debt. It gives the creditor the right to take ownership or sell the property if the debt is not paid. So, if you’re looking for a home without liens connect now.
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Frequently Asked Question
1. Can I sell my house if there’s a lien on it?
Yes, it is possible to sell a house that has a lien on it. Selling a lien house typically involves paying off the debt or negotiating with the lien holder to release or satisfy the lien.
2. What Is a lien waiver?
A lien waiver is a written agreement between a lender and a borrower, where the lender gives up their right to place a lien on the borrower's property.
3. What is a lien search?
A lien search refers to the investigation and subsequent report made on a property. Its main goal is to disclose liens on property.
