What are Property Mortgage Liens?
A lien is a legal claim on real estate (or personal property) which guarantees the lien holder a specified amount of money should that property be sold. Liens on real estate are commonly used by creditors as a way of ensuring that a debt is repaid i.e.: a common way to collect the money they are owed, with the property acting as collateral against the amount outstanding.
Property liens can be problematic for the borrower, as these types of claims can lead to difficulties when trying to sell or refinance your home or property. All liens must be cleared (or paid) before the seller is able to transfer ownership to the buyer, thereby reducing the net profit that the seller will realize from the transaction. A lien against your property may also adversely affect your credit rating, which can limit or restrict your ability to borrow money.
In severe instances, the borrower may be subject to wage garnishment as a means of repaying the debt, or perhaps even lose their home or property altogether.
Types of Liens
Liens on real estate may be categorized as voluntary or involuntary.
Voluntary Liens – Are imposed by a contract between the borrower/client and the lender/contractor:
- Mortgages – The most common type of lien
- Home Equity Line of Credit
- Condominium Fees
- Construction Liens – For contracted services (e.g. major home renovations, landscaping)
Involuntary Liens – Are imposed by law:
- Tax Arrears – Due to unpaid municipal or federal taxes
- Domestic Issues – As a result of unpaid child support or spousal support
- Construction Liens – When a contractor takes legal action to secure payment for services
- Credit Card Default
- Unpaid Student Loans
What Can You Do?
The best way to remove a lien from your property is to clear or fulfil the debt that initially caused or led to the claim. At Mortgage Intelligence, Natasha Bridgmohan and her team of experts have developed a number of plans that can be personalized to help address and rectify property liens.