If there's a lien on your house, that means a creditor asserts that you owe it money. It also means you don't have a clear title to your property until the lien is paid off.
Tax liens are placed on a house by a government entity. If you owe back federal taxes, the Internal Revenue Service may place a lien on your home. If you didn't pay your local property tax bill, your municipality places the lien. If you're a member of a homeowner's association and didn't pay your fees, it can place a lien on your home as well.
A municipal tax lien is among the most serious. If you don't pay the taxes due and accrued interest, in some states you could lose your house at a sheriff's sale. In other states, non-payment may result in foreclosure.
If a creditor takes you to court and wins a judgment, the ruling allows a lien to be placed on your house if you don't satisfy the debt. The lien is recorded in title records, and must be paid if you ever sell, refinance or convey the house to another party.
Although a creditor may foreclose on your house, that doesn't usually happen, unless you don't have a mortgage. In foreclosure, the mortgage debt must be paid before the payment of any liens,
If you're having work done on your house, you may end up having a mechanic's lien placed on the property. It's generally not the contractor who will place the lien, but rather one of his subcontractors who wasn't paid for materials or labor. Mechanic's liens differ from state to state, but the subcontractor usually can place a lien on your house, with the assumption that you can proceed to sue the general contractor. Obviously, that puts enormous pressure on the homeowner, and if the contractor is truly broke, you might end up with a creditor lien on his property.
Liens and Refinancing
Although you don't think of your mortgage as a lien, technically it is. Your mortgage lender has an automatic lien on your house until you pay off the loan. If you don't pay, the lender forecloses. A home equity loan -- a form of second mortgage -- also is a lien. If you want to refinance your mortgage, your lender will take into account any lien on your home.
Liens are released when you pay the debt. Once you have done so, it's imperative to receive a satisfaction letter from the lien holder. You must bring your satisfaction letter and pertinent information about your property -- such as the lot and block number -- to your county clerk's office. Present your letter and follow up to ensure that the lien is removed from the records.
- Internal Revenue Service. "Understanding a Federal Tax Lien." Accessed Sep. 18, 2020.
- Experian. "Tax Liens Are No Longer a Part of Credit Reports." Accessed Sept. 18, 2020.
- Experian. "What Affects Your Credit Scores?" Accessed Sep. 18, 2020.
- Federal Trade Commission. "Fair Credit Reporting Act 15 U.S.C § 1681," Page 22. Accessed Sep. 18, 2020.
A graduate of New York University, Jane Meggitt's work has appeared in dozens of publications, including Sapling, Zack's, Financial Advisor, nj.com, LegalZoom and The Nest.