What Are Mortgage Liens?

What Is a Mortgage Lien?

A mortgage lien is a legal claim a lender places on a property when a borrower takes out a mortgage loan. It gives the lender the right to foreclose on the property and take ownership of it if the borrower defaults on the loan. It ensures the lender has a way to recover their money if the borrower doesn't fulfill the loan terms.

Mortgage liens are considered specific liens, meaning they only apply to the property securing the loan. General liens, by comparison, allow creditors to seize a broader range of assets, not just a single property.

How Mortgage Liens Work

When you take out a mortgage, the property serves as collateral for the loan. As part of the loan agreement, the lender records a lien on the property's title.

You retain ownership of the property, but the lender holds a legal interest in the home until the loan is paid in full. The lien gives the lender the right to foreclose if you default on mortgage payments. They can force the sale of the property to recoup the unpaid loan balance.

If you pay off your mortgage as agreed, the lender will remove the lien and transfer full ownership rights to you.

Learn more: What You Need to Know About Mortgage Default

Types of Mortgage Liens

There are two broad types of property liens: voluntary liens and involuntary liens.

Voluntary Liens

Voluntary liens are liens the property owner agrees to, usually as part of financing. Some types of voluntary liens include:

• First mortgage lien: This is the primary loan used to purchase or refinance a home.
• Second and third mortgage lien: These are liens tied to additional loans like a home equity loan or home equity line of credit (HELOC).
• Purchase money mortgage lien: This type of financing is issued by a home's seller to its buyer, and can be called seller or owner financing.
• Energy upgrade lien: Through clean energy programs in some states, homeowners can finance energy-efficient upgrades that are repaid through collected property taxes.
• Reverse mortgage lien: Available to homeowners age 62 or older, a reverse mortgage allows them to borrow against their home equity for income.

Involuntary Liens

Involuntary liens are placed without the owner's consent, usually due to unpaid debts. An involuntary lien can prevent you from selling or refinancing your home, but may expire after a certain period of time, depending on state laws.

Some common types of involuntary liens include:

• Tax lien: These are placed by the IRS or local government for unpaid income or property taxes.
• Mechanic's lien: When you don't pay a contractor or builder for work or materials used on the property, they can place a mechanic's lien.
• Judgment lien: These are placed when a creditor wins a lawsuit and claims property as payment for the judgment.
• Child support lien: If the property owner falls behind on court-ordered child support payments, this type of lien may be filed.
• HOA lien: These are placed by a homeowners association (HOA) for unpaid dues or fees.

Does a Mortgage Lien Affect Your Credit Score?

A lien itself doesn't impact your credit—because it doesn't appear on your credit report—but the underlying mortgage loan does. Making your mortgage payments on time helps your credit score, while missing payments can hurt it.

If you default and the lender enforces the lien through foreclosure, the default and subsequent foreclosure stay on your credit report for up to seven years. Even though liens don't directly affect your credit, they are in public records, which lenders may check during underwriting.

How to Remove a Mortgage Lien

There are several options for removing a mortgage lien:

• Pay off the mortgage. After payoff, your lender will issue a lien release and file it with your local recording office. In some states, you may be responsible for filing the lien release.
• Involve the law for disputes. If the lender doesn't file a release, a lien was filed in error or there's an old lien on your property, you may need to go to court to have it removed.
• File for bankruptcy. In Chapter 13 bankruptcy, a second mortgage lien can be removed if the home's value is less than the amount owed on the first mortgage.

Frequently Asked Questions

The Bottom Line

A mortgage lien is a standard part of buying a house with financing. It simply gives the lender a legal claim to the property until the loan is paid off. As long as you stay current on your payments, the lien doesn't pose a risk and you can avoid foreclosure.

Involuntary liens, however, put your property and your credit at risk. While the lien itself won't appear on your credit report, missed payments on the underlying debt may be reported and hurt your credit score. Stay on top of your bills and check your credit report regularly to catch delinquencies that could lead to a lien.