You may have heard the term before, but what is a lien on a house?
A lien is a legal document that states that a creditor (the lienholder) may take possession of a piece of property if the owner does not make debt payments on time. A house lien is filed with a county records office and is publicly accessible. To put it simply, a lien is a public warning that you owe payments on a piece of property and that your creditor may seize the property if you fail to pay.
A creditor may file a lien if you miss multiple payments or otherwise fail to pay a debt on time. A lien is the first step toward repossessing a piece of property, but does not guarantee you’ll lose possession or foreclose on your home. In fact, some types of liens are harmless and not indicative of a delinquent payment history.
It’s possible to resolve a lien by fulfilling debts promptly, working out a payment plan, or otherwise creating another type of settlement plan with a creditor. It’s also possible for homeowners to sell a house with a lien attached and transfer the responsibility of repayment to another, though this may be difficult.
How to Find Out If There’s a Lien On Your House
In most cases, you’ll be notified by the lienholder if they decide to file a lien on your home. If you’re not sure if there’s been one placed on your home, you can search on your local county reporter’s website or call them to ask to search for you. You may also ask a third party title company to conduct the search for you for a fee.
Homeowners in Hillsborough County, FL, can search here to find public lien records. Click here to read more on our site about discovering liens on your home.
How Liens Affect You
On its own, a lien is just a public document stating a claim against a property. A lien itself is not a criminal or civil charge. A creditor has the ability to force the sale of your home (a foreclosure) to pay the lien, but this is rare and difficult for creditors to do, so it’s not likely to happen to you.
However, you do have to pay off a lien or risk future consequences. If you’re struggling to make payments, talk with your creditor about payment plans or contact us here at Associates Home Loan for other ideas about how to pay.
Furthermore, a lien on a piece of property that you own can negatively impact your credit score. Most credit reporting agencies collect public documents from counties and states and will use these documents when calculating your credit score.
A paid lien may stay on your credit report for up to 7 years; an unpaid one may stay for up to 10 years. Lenders may view you as riskier if they see one on your credit report.
Voluntary vs. Involuntary Liens
There are two major categories of liens: voluntary and involuntary.
A voluntary lien is one that you agree to when purchasing a home and taking out a mortgage from a financial institution. Everyone with a mortgage has this type associated with their property and it is not harmful to you in any way.
An involuntary lien can be filed without your consent—or even without your knowledge, in some cases. These can be filed by anyone from the IRS for federal income tax debt, the county for missed property taxes, or even contractors who perform work on your home. Involuntary liens require action, whether that’s making back payments or agreeing on a payment plan. Without acting, a creditor may seize possession of a home.
Frequently Asked Questions
Are liens bad?
Not necessarily. Many banks or other financial institutions often place voluntary liens on homeowners once a mortgage begins, and this is an expected and normal process. This guarantees that the financial institution can take possession if the borrower defaults, but does not indicate that you’ve missed payments.
However, an involuntary lien may have negative impacts on your credit score and may make selling a house difficult. In this case, it’s important to resolve the lien as soon as possible to mitigate lasting consequences.
What do I do if there’s a lien on my house?
First, determine if it’s voluntary or involuntary. If it’s voluntary, then there’s no need to take action other than to continue your regular monthly mortgage payments.
If it’s involuntary, then you need to find out who placed it and why. For example, some contractors place liens on homes as a way to ensure they’re fairly paid once work is complete. They may remove it once the job is done, but it’s good to still ask about it.
If you have a lien because of missed payments, then talk to your creditor. They may be able to work out a payment or settlement plan with you depending on your circumstances and reasons for not paying.
How long does it take to resolve a lien?
Voluntary liens automatically resolve once you finish paying off your home.
An involuntary lien will last as long as there is delinquent debt on a property. Once the debt is resolved, you may file a lien release with your local county clerk’s office if the creditor does not do so automatically. From there, it’s a matter of waiting for the paperwork to be processed. It can take up to 30 days for a lien to be removed from the public record.
If you’re facing a fraudulent or scam lien, then you should consult a lawyer to find out your options for resolution.
What if I have more questions?
At Associates Home Loan, we can help if you’re struggling to resolve a lien or want to learn more about how they work. Just click here to contact us and a member of our team can help answer all of your questions about liens, your mortgage, and more.