Skip to content
Endahurtskids

Endahurtskids

Business finance devotees

Primary Menu
  • Business Finance
  • Investment
  • Markets
  • Economic
  • Business
  • Finance
  • About Us
    • Advertise Here
    • Contact Us
    • Privacy Policy
    • Sitemap
  • Home
  • Does a Home Equity Loan Create a Lien Against Your Title?
  • Finance

Does a Home Equity Loan Create a Lien Against Your Title?

By Bessie E. Prokop 11 months ago

A home is usually a valuable asset, and its prices tend to rise over time. Once you’ve built up a decent amount of home equity, your ownership stake can be used to get a nice big cash injection to spend on whatever you want.

This privilege does come at a cost, though. In exchange for lending you large sums of money at generally better rates than you’d get on an unsecured personal loan, the financial institution will put a lien on your property.

Key Takeaways

  • A home equity loan allows you to use the equity you’ve built in your home as collateral to borrow a lump sum of cash. 
  • The loan is secured by the property in the form of a lien, meaning that the lender has permission to foreclose on your home if you fail to keep up with repayments.
  • With the lien, the lender has a claim to something of value that it can seize and sell if necessary to recoup what it’s owed.
  • The lien remains in place until the debt is repaid.
  • If you are still paying off the mortgage on your home, the home equity loan becomes a second mortgage (also known as a “second-lien debt” or “junior debt”).

What Is a Lien?

A lien is a legal claim or a right against a property. Essentially, those in possession of a lien are permitted to sell the asset in question if an underlying obligation, such as the repayment of a loan, is not honored.

Liens are attached to some types of loans to protect the lender in the event that the borrower doesn’t meet their contractual obligations and keep up with payments. With the lien, the lender has a claim to something of value that it can seize and sell if necessary to recoup what it’s owed. In other words, when someone puts a lien on your property, it effectively becomes collateral for the debt.

These legal claims are typically public information, meaning anyone can see if a creditor has a hold on a particular asset, and they remain in place until the debt is repaid. While the lien is in force, the borrower’s title over the property is legally not clear, and they technically don’t have complete ownership of it.

Liens can commonly be searched for online, as many government agencies now store public information digitally.

Does a Home Equity Loan Create a Lien Against Your Title?

Home equity loans enable homeowners to use the equity in their home as collateral to borrow a lump sum of cash. The loan is secured by the property, so if you fail to keep up with repayments, the lender can sell the home to recoup what it’s owed.

If you are still paying off the mortgage on your home, the home equity loan becomes a second mortgage (also known as a “second-lien debt” or “junior debt”). This means that in the event of nonpayment and the subsequent liquidation of the collateral, the original mortgage is first in line to collect. The second mortgage lender can only begin to retrieve its debt once the more senior lien has been honored and paid off.

This situation sometimes results in the lender also chasing down other assets you own. If the proceeds from foreclosure aren’t enough to clear the debt, you may be hit with a deficiency judgment, which gives the lender permission to seize bank accounts, garnish wages, and place liens on other properties to retrieve the balance outstanding. With recourse loans, the creditor can go beyond liquidating the collateral to collect what it’s owed.

When there is a first mortgage, the second one will often carry higher interest rates, as its lien is subordinate and therefore less valuable.

Is a Lien Good or Bad?

Giving a lender a legal right to seize your home cannot be described as a good thing. It is necessary with a mortgage, though, and can actually, believe it or not, be beneficial if you don’t have any issues with paying back the money you were lent.

When you offer your home as a guarantee, the loan becomes less risky to the lender. With the lien, the bank doesn’t need to worry so much about the borrower potentially defaulting, as it has another way to claw back its money. That lower risk translates into more-attractive borrowing costs, expressed in the form of interest rates.

Loans with liens attached carry lower interest rates than unsecured debt.

It’s also worth remembering that a bank with a lien against your property can only seize the asset if you fail to fulfill your contractual obligations. If you keep up with payments and do as you promised, the lien shouldn’t harm you or have any notable negative repercussions.

Problems occur when borrowers run into financial difficulties. If you lose your job or a key source of income and have little in the way of savings, that home equity loan that looked like such a great idea could come back to bite you. Stop paying and the lender has the right to proceed with foreclosure, kicking you out of your house and leaving you homeless.

There’s also the risk that property values plummet and push you “underwater,” meaning that you owe more on the loan than the house is worth. Having a mortgage loan that exceeds the value of your home may sound unbelievable, but it has happened to many people and it isn’t a good place to be.

What Happens When You Default on a Home Equity Loan?

Home equity loans are secured loans, meaning that if you fail to keep up with repayments, the lender has the right to sell your house to collect what it’s owed.

What Is the Difference Between a First Mortgage and Second Mortgage?

Plenty of people with a home equity loan are also still paying off the mortgage used to buy their house. When that’s the case, the home equity loan is structured as a second mortgage. The first mortgage takes priority over the second one when claiming the collateral. In other words, the new lender can only exercise its right to cash in on its lien once the first mortgage has been paid off.

Can You Sell Your House if You Have a Home Equity Loan?

You’re free to put your home up for sale without settling a home equity loan or other liens. However, if the sale goes through, you will need to pay off the creditor holding the liens on your home’s title with the proceeds.

The Bottom Line

Home equity loans and their attached liens aren’t necessarily bad for homeowners. These guarantees make it cheaper to borrow money and won’t cause harm if the borrower honors the agreement.

Whenever you take out any loan, you must be aware that there will be repercussions if you don’t pay it back as agreed. With a home equity loan, it is your house that is at stake, which is why it is so important to fully understand the terms and repayment conditions before committing.

A home equity loan can be a great way to get a relatively cheap cash injection. But if you’re unable to keep up with the payments, it can also turn into a nightmare and leave you homeless.

Tags: Amazon Business Credit Card, American Airlines Business Class, Att Business Login, Austin Business Journal, Best Bank For Small Business, Best Business Bank Accounts, Best Business Schools In Us, Best Business To Start, British Airways Business Class, Business Attire Men, Business Card Ideas, Business Casual Shoes For Women, Business Continuity Planning, Business Entity Search, Business Letter Template, Business Management Degree, Business Manager Facebook, Business Plan Outline, Business School Rankings, Colorado Business Search, create, Delaware Business Entity Search, Drop Shipping Business, Equity, Family Business Bet, Fox Business Live, Georgia Sos Business Search, Google Business Account, Harvest Small Business Finance, Home, How To Build Business Credit, Is Saturday A Business Day, Is Sears Still In Business, Lien, loan, Microsoft 365 Business, My Business Google, Name Generator Business, None Of Your Business, Ny Sos Business Search, Open A Business Bank Account, Pa Business Search, Plus Size Business Casual, Pnc Business Banking, Sos Business Search Ca, Sunbiz Business Search, Taking Care Of Business, The Business Of Being Born, Title, Turbotax Home And Business 2020, Tx Sos Business Search, Venmo For Business, Verizon Business Plans, Virtual Address For Business, What Are Business Days, Women Business Casual

Continue Reading

Previous 10 top Ways to Fund your Startup
Next “What is Quantitative Easing?” | Kansas City Private Investment Lender & Entrepreneur
March 2023
M T W T F S S
 12345
6789101112
13141516171819
20212223242526
2728293031  
« Feb    

Archives

  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • June 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • January 2019
  • November 2018
  • October 2018
  • September 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • February 2018
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015

Recent Posts

  • Ensure Your Online Business Success: Allocate Enough Funds for Your Online Business
  • Why Should You Buy Critical Illness Cover Even after Buying Term & Health Insurance?
  • Common Exclusions And Limitations In Travel Insurance Policies
  • Different Business Plans for Different Readers
  • Easy Business Ideas That Made Millions

BL

endahurtskids.com All rights Reserved.

Tags

Accounting Advertising Affiliate Marketing Att Business Login Bad Credit Bank Loans Branding Breaking News Budget Planning Business Business Administration Business Analyst Business Articles Business Cards Business Card Template Business Consultant Business Current Events Business Development Business Ethics Business Finance Business Idea Business Ideas Business Intelligence  Business Law Business Letter Business Letters Business Loans Business Logo Business Magazine Business Management  Business Marketing Business News Business News Today Business Opportunities Business Partner Company  Finance Management  Marketing Money  Online Business Ideas Opportunity  Sales  Stocks  Work 

Randomize

How To Build A Computer

scorpion control las vegas 

contentplacement.id

getlinko

endahurtskids.com | Magazine 7 by AF themes.