A mortgage lien is a legal claim or encumbrance on a property that is mortgaged. There are a few different types of liens; a second, third, or subsequent mortgage is a type of lien. A tax lien can be assessed on a property due to unpaid federal taxes, or a lien from a creditor due to unpaid debts. In a mortgage lien, the home serves as collateral for unpaid debt; when the home is sold, the creditor who has assessed the lien against the home receives a cut of the profits from the sale of the home equal to the amount of the lien.
A mortgage lien sounds slightly confusing, but it really isn't. In fact, a first mortgage is a type of mortgage lien. When the borrower takes the mortgage loan out on the home, the bank then holds a lien against the property. If the borrower does not pay the mortgage, the bank can foreclose on the home and reclaim the property, thereby getting their money for the loan back. If the borrowers make regular payments on the home, however, they will eventually pay off the mortgage, and own their home outright, at which time the bank relinquishes any claim to the home and removes the lien on the property.
There are other reasons for a mortgage lien to be assessed against a property, however. Unpaid taxes are a common cause, which may also be referred to as a tax lien. Unpaid legal fees are another reason that a lien may be assessed against the home. These are known as non-consenual liens. Consensual liens, by contrast, such as those taken out by the homeowner against the home in the form of a second or third mortgage, are initiated by the owner.
Each type of lien is filed with the county in which the property is located. Once the lien is paid, a petition to release the lien is then filed with the county, and the documentation is updated. It is important for the homeowner to make sure that this happens in a timely fashion to prevent any difficulties if the home is ever sold at a later date. The only way to discharge a lien is to pay the lender; as mentioned above, this can occur at the time of the sale of the home when profits are made, or the debt may simply be paid by the borrower as with any other debt.