What is a lien on a house?

There may be different types of liens on a house. One type of lien is a voluntary lien known as a mortgage lien that may be used when purchasing real estate.8 On the other hand, an involuntary lien may be placed on a property when the owner is unable to pay their debts.

What is a Lien?

6 Min Read | Published: March 5, 2024

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A lien is a legal claim against assets that may be used as collateral in order to repay a debt. Learn how liens work and how to remove them.

At-A-Glance

A lien is a legal claim that allows creditors to gain access to property if a debt is not repaid.
Common types of property liens include mortgage liens, tax liens, homeowner’s association (HOA) liens, and car liens.
Liens can be removed through debt repayment, negotiation of settlements, or legal procedures.

Understanding the purpose and implications of liens is essential for both borrowers and lenders. Liens play a crucial role in financial transactions and understanding how they work can help you to be a more responsible borrower.

Let’s explore the definition of a lien, the types of liens, the importance of liens in financial transactions, as well as potential options for removing them.

What Is a Lien?

A lien is a legal claim that allows creditors to obtain access to the property of a borrower if the debt isn’t repaid.¹ It is a powerful tool used by creditors to ensure that they have a means of recourse if the borrower fails to fulfill their financial obligations.

Liens can be attached to various assets, such as property, vehicles, equipment, or other personal assets.² When a debt is undertaken, a lien is placed on the borrower’s property, which remains until the debt is settled.

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How Liens Work and Their Importance In Financial Transactions

Liens are a legal mechanism that allows a creditor to secure their investment in a financial transaction. When you borrow money or enter into a financial agreement, the lender may place a lien on your property as collateral.

This gives them the right to gain access to the property if you fail to fulfill your obligations. Liens can be voluntary or involuntary, depending on the circumstances.

Voluntary liens are created with your consent, such as when you take out a mortgage.
Involuntary liens, on the other hand, are imposed by law, such as judgment liens.

Voluntary liens are agreed to by the property owner as security on a debt or loan, while involuntary liens are placed on the property without the owner’s consent due to unpaid debts or obligations.

Liens play a crucial role in financial transactions, providing a level of security for lenders. When a lien is placed on a property, it legally protects the lender’s investment and gives them the right to seize the property if the borrower defaults on their payments. This ensures that lenders have a way to recoup their losses in case of non-payment.

Additionally, liens can also affect the priority of debts, determining the order in which they are paid off in the event of a property sale.

Different Types of Liens

Typical liens include mortgage, car, and judgment liens.

Mortgage Liens – A mortgage lien is a specific, voluntary lien that is commonly used to purchase real estate and is created when borrowing money from a lender to purchase property.³ The loan is then secured against the property.
Judgment Liens - A judgment lien is a type of involuntary lien that is a court ruling giving a creditor the right to take possession of a debtor’s property if they fail to meet their contractual obligations.⁴
Car Liens - A car lien is a third party’s legal claim to your vehicle. It is typically created when a borrower finances the purchase of a car or uses the car as collateral for a loan.⁵
Tax Liens - A tax lien is lien that may be imposed by the federal, state, or local government to an individual or business for a failure to pay taxes.⁶
Homeowner’s Association (HOA) Liens – If you own a home in a HOA, and have unpaid dues or violations, that HOA may be able to put a lien on your property. While this will vary, depending on the HOA and what state you are in, this lien can make it difficult or impossible to sell your home. If left unpaid, it could set in motion a series of events which could result in foreclosure.⁷

Methods for Having a Lien Removed

The approach you take to have a lien removed will vary depending on each lien type and creditor.

The best way to remove a lien is to pay the amount due in order to have the lienholder release their claim.

If you have the funds, you can send in the money to the lienholder (the person with the claim) as long as you have an agreement with them that they’ll release their legal claim on the property once you do.

If you feel as though the lien is inappropriately levied, following through with a legal procedure is another approach that you could take. This may entail a formal lawsuit filed in court against the lienholder seeking a court order to remove the invalid lien. The court can then decide if the lien is valid.

Regardless of your approach, acting promptly is key. Remember, it’s always advisable to consult with a legal professional for guidance on your specific situation.

Did you know?

The easiest way to remove a legitimate lien is by paying the outstanding debt. You can pay the debt in full, or, in some cases, may be able to negotiate a payment plan.

Frequently Asked Questions

Liens provide creditors with the ability to secure collateral and can help to encourage debt repayment.

Common types of liens include mortgage liens, tax liens, HOA liens, and car liens.

There may be different types of liens on a house. One type of lien is a voluntary lien known as a mortgage lien that may be used when purchasing real estate.⁸ On the other hand, an involuntary lien may be placed on a property when the owner is unable to pay their debts.⁹

The Takeaway

A lien is a legal claim against assets that may be used as collateral to repay a debt, but liens can take many different forms. By understanding how liens work, you’ll know what steps you need to take when it comes to handling your debt.

^1,2 “Property Liens,” Investopedia

^3,8,9 “What is a Mortgage Lien,” Bankrate

^4,6 “Judgment Lien: Definition, Examples, Vs. Property Lien,” Investopedia

⁵ “What Is a Lien on a Car?,” Upstart

⁷ “HOA lien on your house? Here are your options,” Point

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Kaelynn Midgley is a writer and content marketing strategist. She creates practical content on budgeting, saving, investing, taxes, and all aspects of personal finances.

All Credit Intel content is written by freelance authors and commissioned and paid for by American Express.

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