What is a mortgage lien?

What is a lien on a house?

A lien is a legal claim on a property granted to a creditor by a court or property owner. The lien essentially gives the creditor — also called the lienholder — the ability to claim your property if you don’t pay your debt to them.

There are two types:

• Voluntary liens: These require your consent and are typically a condition of getting a loan. A mortgage is a type of voluntary lien.
• Involuntary liens: Lenders can put involuntary liens on your property without your consent. Your property might have an involuntary lien if you’ve failed to pay property taxes, for example, or you didn’t pay a contractor.

Beyond these, there are also general and specific liens. General liens can be placed against all your property, while specific liens can only be placed on a certain piece of property.

Is a mortgage a lien?

A mortgage is technically a type of property lien — it gives a creditor a claim to your home until your mortgage loan debt is paid off. In this case, the creditor is the mortgage lender.

If you default on your mortgage, your home may go through the foreclosure process, during which the lender takes possession of your home and sells it to cover the debt. A mortgage lien is a voluntary lien because you agree to the lien as part of the loan.

Other types of property liens

A mortgage lien is just one type of lien. There are several other voluntary and involuntary lien types:

• Tax liens: Tax liens are involuntary liens placed against your property if you fail to pay taxes owed. If you fail to pay your property taxes, the local government can get a property tax lien on your home. This usually takes priority over all other liens, even if another lien was in place already. The IRS can also place an involuntary lien on all your property if you fail to pay back taxes after you’ve ignored its notices.
• Mechanic’s liens: Mechanic’s liens are involuntary liens placed by a mechanic or other contractor if you fail to pay for services performed (like home improvement work). The contractor has to file the lien within a specific time frame that varies by state.
• HOA liens: If you fail to pay your homeowners association dues, the HOA may ask a court to issue a judgment granting it a claim against your home.
• Judgment lien: A judgment lien is a general term for any involuntary lien placed on your property by a judge when someone wins a lawsuit against you. It’s different from a statutory lien, which is placed on a property through state or federal law instead of through the court.

Liens and foreclosure

In the case of any voluntary or involuntary lien, the lienholder can force a foreclosure to sell your home and recoup the money they’re owed once they have a lien on your property.

The exact timing depends on your state’s laws and other factors. If you have multiple liens against your home, a creditor may not force the sale right away because their chance of getting paid is lower. If you have very little home equity and a creditor who’s not your mortgage lender wants to force the sale, there may not be enough money left over to cover the debt after paying the mortgage company.

How to remove a lien

Once you pay off your mortgage loan, your lender is legally required to release your lien. However, it may take two to three weeks to do so. If you don’t hear back within that time, call or visit your lender and let them know you haven’t received documentation detailing the lien release.

If that still doesn’t work (and if your local and state laws allow it), you may be able to bring written third-party evidence of your mortgage payoff to the relevant government agency and request that the lien be released.

A mortgage lender must release the lien on your property once you’ve paid off your home loan.

If you have an involuntary lien on your home, there are a few ways to get it removed:

• Satisfy the debt: Pay off the obligation, and you can ask the creditor to release the lien.
• Negotiate: You may be able to negotiate a settlement with your creditor.
• Wait out the statute of limitations: Every state has different laws regarding the time frame in which a lien can last and how long a creditor has to sue. If a creditor is too slow and the statute of limitations runs out, you may be free of the lien. This is extremely risky, however, because it relies on the lienholder not acting on their legal right to seize your property.
• Chapter 7 bankruptcy: Filing for Chapter 7 bankruptcy could remove certain types of liens, such as judgment liens, against your property.
• Through court: If the lien is due to coercion, fraud or bad faith, you may be able to get the court to lift it. This can be difficult to prove, though, so you’ll need solid evidence.

Bottom line

The word “lien” often has a negative connotation, but a lien isn't always bad. If you’re buying a property using a home loan, a mortgage lien is inevitable. The lien functions as security for a significant loan — if you don’t pay what you owe the lender, your ownership of the home is in jeopardy.

As long as you make your payments on time over the life of the loan (and you avoid any involuntary liens), a mortgage lien is nothing to worry about. The lender will remove the mortgage lien once you completely pay off the loan.