What is a property lien?

A property lien is a legal claim on a property that serves as security for a debt or obligation. When a lien is placed on a property, it means that the creditor has a legal right to take possession of the property if the debt is not repaid. This concept is crucial in mortgage lending as it protects the lender’s interests by ensuring that they have a claim against the property in case of default on the loan.

For instance, in the case of a mortgage, when a borrower takes out a loan to purchase a home, the lender files a lien against the property. This allows the lender to recoup its investment through the sale of the home if the borrower fails to make mortgage payments. This security mechanism is fundamental to the functioning of the real estate and mortgage markets, as it enables lenders to provide loans with a certain level of risk management.

Understanding this concept ensures that borrowers are aware of the implications of taking on debt secured by real estate, as well as the potential consequences if they are unable to meet their payment obligations.