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A mortgage lien is a legal claim that grants your lender the right to your property if you fail to repay the home loan. When you take out a mortgage loan, you agree to have a lien placed on your property, which financially protects the lender if you default on the loan.
Here’s a closer look at mortgage liens, including how these legal claims on a property can affect you as a homebuyer or owner.
Read more: What is a mortgage, and how does it work?
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Simply put, a mortgage lien is a legal claim a lender has against your property, giving them the right to recoup their investment if you fail to make your mortgage payments. If you haven’t paid off your mortgage in full yet, a lien exists on your property, so the home acts as collateral to ensure the lender has some form of protection in case of default.
Liens can be further divided into first-lien mortgages and second-lien mortgages. The main difference between the two is the priority of payment in the event of a mortgage default. First-lien mortgages have the first claim on collateral, meaning the lender is paid first in the event of foreclosure. And because second-lien mortgages are subordinate to the first mortgage on the property, the second-lien holder only gets paid after the first-lien holder has received payment.
Generally, the primary mortgage you use to purchase your home is considered a first-lien mortgage. Any home loans you take out afterward, such as HELOCs and home equity loans, are second-lien mortgages. So, if your home is sold due to foreclosure, the proceeds will pay off your original mortgage first, then your HELOC or home equity loan.
Mortgage liens are just one of the many types of liens a creditor can place on your property. Unpaid taxes, contractor work, or HOA fees can also lead to property liens that could negatively affect your ability to sell or refinance the home.
Dig deeper: What to expect when facing a mortgage default
There are two categories of property liens: voluntary versus involuntary and general versus specific.
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Voluntary lien: Voluntary liens are those you willingly accept, such as liens on a primary mortgage or HELOC. When you sign on the dotted line, you consent to the lender’s right to claim your property as collateral if you fail to repay the debt.
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Involuntary lien: Involuntary liens are imposed on you without your consent, often due to unpaid debts. For example, you may face a property tax lien if you fail to pay your taxes.
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General lien: General liens can be attached to all real property you own rather than one specific item. So, if you fail to pay your debts, creditors could seize not only your home, but also things like your cars or land.
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Specific lien: Unlike general liens, specific liens can only be attached to a particular item, such as a house. A mortgage lien would be considered a specific lien since it applies only to the home that secures the loan.
A mortgage lien is not the only type of legal claim creditors can place on your property. Here are some other common ones you should be aware of as a homeowner.
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Contractor lien: This is also known as a builder’s lien or mechanic’s lien. This claim can be filed against a property by contractors or subcontractors who’ve performed work but have not yet been paid. In other words, a contractor lien gives them a legal claim to your property until you compensate them. In some parts of the U.S., unpaid real estate agents and mortgage brokers can also use contractor liens.
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Judgment lien: This court-ordered claim allows the lien holder to take possession of your property if you fail to repay your debts. Creditors can place a judgment lien on your property if they take you to court and the judge rules in their favor.
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Homeowners’ association lien: When you buy a home within a homeowners’ association, you’ll have to pay fees to help the HOA maintain the community. If you fail to pay your HOA dues or assessments, your homeowners’ association can place this lien on your property to recoup unpaid fees.
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Federal tax lien: The U.S. government can file a legal claim against your property due to unpaid federal taxes.
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Property tax lien: This is another type of legal claim that the government can place on your home to recoup its dues if you fail to pay property taxes.
Read more: Should you buy a home with a homeowners’ association?
If you’re a homeowner, liens can make it tricky to sell or refinance your home until the debt is resolved. This is because most buyers will want a home with a clear title, and mortgage lenders may be reluctant to lend them money if they’re trying to buy a home at risk of foreclosure. In more severe cases, depending on your jurisdiction and lien type, you could lose your home to a forced sale. And while liens don’t typically show up on your credit report, not making timely payments on the debts linked to a lien will probably damage your credit score.
If you’re a homebuyer, property liens discovered in a title search can complicate and delay your home-buying process since you’ll have to wait for them to be cleared. If the seller refuses or is unable to pay off the debt, the real estate transaction may be put on pause indefinitely.
Dig deeper: How a property title search works when buying a house
A property lien can complicate the process of buying, refinancing, or selling a home. Here’s how to remove it.
If the lien is valid, the most straightforward way to remove the lien from your property is to pay off the debt you owe. If you’re unsure what that amount is, contact the lien holder for more information.
If you’re not in the financial position to repay the debt you owe, try negotiating with the lien holder. Some may be willing to accept a lesser amount to remove the lien.
If you believe the lien was incorrectly placed on your property, you could challenge it by requesting a court order and providing evidence showing that the lien is invalid.
When you take out a mortgage, your lender will place a lien on your property, which gives them the right to seize and sell your house if you default on the loan. If there are no mortgage liens on your property, that means you’ve already paid off your home loan. You can contact your county recorder of deeds or local Secretary of State to confirm your lien was released after paying off your debt.
A mortgage lien is one of the most common types of lien on a property, which gives the lender rights to the property if you default on the loan. Other common types of property liens include federal tax liens, property tax liens, HOA liens, and judgment liens.
Mortgage lenders, contractors, suppliers, creditors, homeowners’ associations, government agencies, and any party you owe money can place liens on your house.
This article was edited by Laura Grace Tarpley.