What Is a Lien on a House?

A lien on a house is a legal claim. The most common type of lien on a house comes from a mortgage. A lien is a legal tool to protect those owed money and ensure they’re repaid. The legal claim from a lien is attached to a property or other valuables like a car, jewelry or furniture. In the cases of mortgage or real estate, the lien is attached to a house and the property it’s on. What is a lien on a house? Read on to understand how it works and the factors that may affect a lien on your property. 

What Is a Lien?

A lien is a legal instrument that allows a lender to hold a claim on collateral, such as a home, until the debt is repaid. Mortgage and property liens are attached to real estate or properties on which the owner has a mortgage. A lien gives the lienholder, usually a bank or mortgage lender, the ability to foreclose on your home if you fail to make monthly mortgage payments. 

How Does a Lien on a House Work?

When you apply for a mortgage and get mortgage approval, the mortgage lender will place a lien on the house. That’s because the property is used as collateral to guarantee the home. Before closing on the home, the title company or mortgage lender will perform a title search to ensure there are no outstanding liens on the home you were unaware of. If the previous owners had a mortgage on the home, that lien will appear until it’s paid back. 

When you close on the home, the new mortgage lender will place a lien on the home that gives it the right to foreclose on the property in case of failure to pay back the mortgage. The type of lien varies based on your situation.

Types of Liens

Lenders may place one of several types of liens on your property, from property liens to tax liens. Here”s how each type of lien can affect you. 

1. Property Liens

A property lien is the most common type of lien. Mortgage liens fall under the category of property liens. When you take out a loan to purchase a property, you are asked to offer the home as collateral. If you fail to repay the loan, the lender may foreclose on the home and sell it to recover their losses. 

Whenever a title company performs a title search, property liens will show up in the search. When selling a home, you must settle the dispute with the mortgage lender or lienholder. This clears the title and allows you to proceed with the sale.

2. Mechanic’s Liens

A mechanic’s lien, also called a construction lien, could be put in place if the owner fails to pay a contractor for work on the home. A mechanic’s lien is a type of involuntary lien that can only be placed against the property where the work was done. If you own other properties, real estate or assets, a mechanic's lien won’t apply to them. Once you pay for the work performed, the lien should be cleared. 

3. General Judgment Liens

A general judgment lien is an involuntary lien placed on the property or other assets placed as part of a court judgment. If a lender sues a borrower for nonpayment of a debt, a court may put a lien on the borrower’s property. 

4. Tax Liens

A tax lien is another type of involuntary lien that can be placed on a property if the owner fails to pay income tax, property tax or any other type of state or local tax. In the case of a tax lien, the government places a lien on the property, real estate or other financial assets.

If a property has multiple liens, a tax lien takes priority over other liens. That means, for example, if you sell the property, you must first use the money to pay back the tax lien before paying off the mortgage lien or any other liens.

How Do Liens Affect Homeowners?

Liens affect homeowners both positively and negatively. The ability to put a lien on a property gives lenders the confidence to offer the mortgage. This allows the majority of homebuyers to purchase a property. Without a mortgage, you’d need to save the full value of the home before buying it, which could take decades for most people. As long as you make all monthly payments on time, the lien allows you to borrow money and build equity in the home over time.

If you go through a hard time from unexpected medical expenses, loss of employment or other issues and have difficulty paying the mortgage on time, you risk foreclosure. A lien means that when things are tough, you could lose your home. While there are steps to take to help prevent this, liens on homes have this major potential downside. 

How Long Does a Lien on a House Last?

A lien on a house varies depending on the type of lien and local laws. In some cases, the lien lasts for 10 years, while in other states, the lien remains until the loan is repaid in full. The only way to be 100% sure the lien is removed is to pay it back. That can be done by paying off the mortgage over time or selling the home and repaying the debt. 

How Can You Remove a Lien?

You can remove a lien by satisfying the debt, negotiating with the creditor, or challenging the validity of the lien in court.

• Pay the debt: The most effective way to remove a lien is to pay off the debt. You will need to confirm that the lien has been removed.
• Negotiate: If you can’t pay back the debt to the lienholder in full, you could negotiate a payment plan or lower repayment amount to remove the lien.
• Dispute it: If the lien isn’t valid, or you’ve already paid it back and the lien wasn't removed, you can ask for a court order to remove it. You’ll need evidence to support the claim that the lien is no longer valid. Learn more about a lien release here.

What Happens if You Don’t Pay a Lien?

If you don’t pay the lien, the creditor may pursue legal action, such as foreclosure, to recover the outstanding debt. In that case, if the lien isn’t paid back after foreclosure, the owner will sell the home to recover the debt. 

The Pros and Cons of a Property Lien 

Property liens are a legal instrument lenders use to protect themselves in offering a mortgage to borrowers. While they present a risk, as long as you plan to pay the mortgage on time each month, it doesn’t present a huge risk to borrowers. If you need to remove a lien, you can pay off the debt. If that’s not possible, you have options to negotiate it, or if it’s not correct, dispute it legally. Ready to buy a home? Find the best online mortgage lenders or the best refinance mortgage lenders. 

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