When many people think about having a lien on their home, they immediately worry. The truth is, though, that not all liens are bad. A lien, as defined by Cornell Law School, is “a security interest or legal right acquired in one’s property by a creditor.” Liens come in many forms, such as a particular lien, general lien, or mechanic’s lien. Even your mortgage is an example of a lien. Good or bad, liens can have some surprising effects. Here are four unpredictable ways liens can impact you as a homeowner.
Effects on Your Credit Score
Perhaps the most obvious impact of a lien is on your credit score. Some liens, like your mortgage payment, are consensual liens and will not have a negative effect. However, other types like judgment liens have a negative impact on your credit score and report. These liens show up on your credit report because they deal with your repayment history. If you fail to make regular payments on these liens, your credit score is likely to take a hit. What’s more: these liens could stay on your credit report for up to seven years.
Struggles in Qualifying for Future Loans
In that same vein, failure to properly deal with a lien could make it hard to get loans in the future. If you don’t make your payments and your credit score stays low, future lenders may be hesitant to work with you. Even if your lien is paid off, it could still stay on your credit report. That’s why on-time payments and communication with your lender are key if you’re struggling with your finances.
Potential Difficulties Refinancing
Speaking of finances, liens can make it much harder for you to refinance your home. Regardless of what kind of new mortgage you’re looking at, you can’t get one until you pay your lien in full. In some cases, the lien must be paid off before you even apply for a new mortgage. Otherwise, it has to be paid at the time of closing.
Limits to Your Actions With Your Home
In essence, a lien means that your home doesn’t completely belong to you. Whether your home is single or jointly owned, a lien means that your creditor has a stake in your property as well. So, having a lien means you may be limited to what you can actually do with your house. For instance, let’s say you try to sell your home while you still have a lien. You might not actually have the full rights to do so. It all depends on the terms of the lien and the position of your creditor.
Though not all liens are bad, all liens can impact you and your life. In some cases, you may want to sell your home and start fresh. Consider working with a cash buyer like InHouse Offer. We buy houses in California and make it easy to get a cash offer in just a couple of weeks. Contact our team to learn more!
