As a homeowner or home buyer, you’ve probably been warned about liens and what they can mean for you. But what is it exactly? Here’s what you need to know:

Liens Act as Security

The main function of a lien is to ensure security for a party with whom you owe a debt. For example, say you didn’t pay your property taxes. Now your home has a tax lien on it and the government can take your home to sell and get their money back if the tax isn’t paid off. A lien on your property can even hurt your chances of selling your home, because buyers take on the responsibility of the lien and it will be extremely difficult for them to get a Kansas City home loan.

There Are 3 Types of Liens

A lien exists to give a creditor legal right to sell your home should you not honor a contract for a loan or service. There are three types:

  • Mechanic’s lien
  • Judgement lien
  • Tax lien

A mechanic’s lien is sometimes placed on your home when it has undergone renovations. That way, the contractor will rest assured that you won’t run out on the bill. A lien can be also placed on your home if you lose a court case until the winning party can collect their winnings. Finally, if you don’t pay your property taxes, the government can put a lien on your property until you pay.

Remove Liens As Quickly as Possible

When you have a lien on your home for one reason or another, it’s a good idea to get it removed as quickly as possible. You can do so by contacting your attorney and making sure that the lien is valid—meaning that there is just cause for the lien against you. Then, you will need to file a release-of-lien report with your county record’s office. Liens are generally public record, so this report will help you have evidence that a lien was removed from your property.

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The above information is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction.