Understanding Property Liens

When you own a home, you have a lot of expenses, including the mortgage. However, one expense that you can avoid is a home lien. If you're in the market for a new home, it's important you understand what you're getting yourself into. If you would like to know more about property liens, keep reading.

What Is a Property Lien?

A property lien is like a loan that your house took out. Typically, people end up with a lien on their home because they needed to use the house as collateral for a debt. The problem with a lien is that it doesn't follow you; it follows the house.

Therefore, when it's time to sell, it may be harder to find buyers. Not only will they be taking over the mortgage payments, but they will now be responsible for the lien. This also poses a problem when you try to refinance your home to lower your payments or interest rate.

What Are the Types of Liens?

There are multiple types of liens, but most are separated into voluntary and involuntary liens. As the name suggests, a voluntary lien is one that you take out by choice. This is often done for mortgage liens and UCC liens (cases involving private lending from one person to another or a business to a client). However, in some cases, a lien is forced upon your home without your consent or agreement.

These include tax liens, mechanics liens, and judgment liens. Judgment liens can include anything involving a lawsuit. For example, if you are sued and lose, but you can't pay the settlement, the courts may put a lien on your home, so the money will eventually be paid.

How Are Liens Repaid?

Liens are repaid in multiple ways. For a general lien on you and your property, the courts may require you to sell any property to repay the lien. However, if the lien is a specific lien, it's on a specific piece of property, and only that property can be used to pay off the lien. Once the lien is paid off, it's gone.

If the homeowner is unable to continue to pay the lien and the mortgage, the house may go into foreclosure. When this happens, the lien gets priority, which means it is paid first. Therefore, the mortgage lender may not get everything they are owed.

If the homeowner files for bankruptcy, the lien is not discharged. Liens are secured debts, which means they usually survive bankruptcies. You'll be required to sell what you can to repay the debt.

A home with a lien on it can be problematic for both the buyer and seller. For this reason, it's important that you fully understand the cost of the home you are buying. If you would like to know more, check out property lien search providers today.