What is a Property Lien and Why it Actually Matters
If you don’t know what a property lien is, that’s alright. This is your chance to learn a little more about what it is, why it matters, and how to prevent negative liens from being placed on your property.
Property lien defined
At a basic level, a property lien is a legal claim against your home that must be paid in full when you sell your property.
Good vs. bad liens
A lot of people have liens against their house. In most cases, it’s a mortgage or home equity loan, which is a normal type of lien.
Buying a home allows you to plant roots and raise your kids. The mortgage lien is allowing you to pay for that home and investment over time rather than all up front. In this case, a mortgage lien is supporting you.
That’s the not the case for other types of liens which require you to pay off the debt without any benefit to yourself. For instance, the government can file a lien against your property if you fall behind on your property taxes. Contractors can file liens if you don’t pay them for their work. Other liens can be filed as well depending on state laws.
Effects of liens
Any lien against your property, other than a mortgage lien, will make it more challenging to sell, refinance, or even take out a second mortgage or home equity line of credit. This is because the debt is attached to your property, not you, and you’re not allowed to transfer the deed without the lien being paid first.
The easiest way to prevent someone from placing a lien on your house is to keep up to date with your bills. In addition, try to pay subcontractors directly. In some instances contractors have been known to accept payment for their subcontractors and then never disperse the money to them, forcing the subcontractor to file a lien against your property.