Liens are more common than you think, and there is a big chance you have a lien on your home. A lien is a creditor’s claim on a property that allows them to recover amounts due if you default.
Liens can be voluntary, like a mortgage loan, since you provided consent and entered into an agreement with the lender to place a lien on your home. It could also be involuntary when you default on debt, and the creditor proceeds to place a lien on your property.
What types of liens are there?
There are several kinds of liens that you could have on your house. They include:
- A mechanic’s lien, also known as a construction lien, can be filed by a contractor or subcontractor when you do not pay them for work done on your home
- The taxman may place income and property tax liens on your house if you are late on your business, income, or property taxes
- A judgment lien following a court judgment against you
In the worst-case scenario, the title may be transferred to cover the amount you owe the creditor. This may occur if you fail to meet your financial obligations, yet there is a lien on your house. In other cases, a lien may simply sit there – but it could be an impediment to a sale in the future.
How do you remove a lien?
When you have an involuntary lien on your house, it means that you do not have a clear title to it. Therefore, it may limit your options regarding what you can do with it, which is why it may be advisable to get rid of any lien.
The simple solution is paying what you owe, but you could try and negotiate the lien with the creditor when that is not feasible. Alternatively, you could dispute it if you think the lien is not valid.