A lien on a house is a legal claim against the property that can be used as collateral to ensure the repayment of a debt. It is like a public mark put on the property that shows up in government files. Liens can be attached to real property, such as a home, or personal property, such as a car or furniture. When a homeowner takes out a loan to buy a house, they agree to offer up the home as collateral. In the event that they cant pay back the loan, the lender may sell the home to recover their losses.
Liens can be voluntary or involuntary. Banks look for liens when theyre financing or refinancing a property. If theres a lien on a property, the debtor will probably have to pay the creditor when they sell or refinance their home or other real estate they own. If the creditor doesnt want to wait for the debtor to sell or refinance their property, they can look into "foreclosing" on the judgment lien. This means that they force the debtor to sell the property and pay them with that money. However, this doesnt work if the money owed is a consumer debt (debt taken out for personal or household use) .
If a homeowner doesnt settle an obligation, then the lienholder may legally seize and dispose of the property. Tax liens are no longer reportable, but other involuntary liens may impact the homeowners credit score. Homeowners can remove liens by making payment arrangements or settling debts.
