What Is a Lien on a House?

They are different types of liens used for different purposes. Someone can file a lien on a property as a way of establishing an ownership interest. Anything that keeps the title to a home from being free and clear is a form of lien. Liens are used to help collect on an amount owed.

Judgment

If you don't pay a credit card company, they can pursue legal action and receive a judgment. Once they have a judgment, they can file a lien on your property.

Home Sale

Liens don't allow you to collect on judgment immediately, but they will eventually. If a home is sold any liens must be paid off before the sale goes through.

Security Interest

A lien is recorded at the county court house which establishes it as a perfected security interest. When liens are paid off, a release has to be filed with the courthouse as well to show it has a zero balance.

Refinance

When someone decides to refinance their home, any liens must be paid off before the transaction can be completed.

Equity

If there is a lien on a property it reduces the amount of equity in the home. If the property is valued at $75,000 and the first mortgage balance is $30,000 and there is a lien in the amount of $10,000 the equity in the home is $35,000 ($75,000 - $30,000 - $10,000 = $35,000).