A property lien is a legal document that shows a person or company is owed money against that home, such as a mortgage. If you obtain a loan to buy your home, and then sign a mortgage, that creates a lien on your property. A home lien is a claim of legal interest in your home made in order to secure payment of a debt.

If you do not pay your mortgage loan, you can place a voluntary lien on your property and use your house as collateral for the loan until you can obtain the funds necessary for home improvement or to consolidate your debt. In most cases of default on a mortgage, a creditor will place an involuntary lien on a debtor’s property for the value of the debt owed, and the home is used as collateral against the debt. If the lien holder notifies you that you are in default, they can initiate foreclosure proceedings to recover their money. Liens are recorded at the county court house. Once the process begins, creditors must follow specific state laws in order to place liens on property. If your lender agrees to accept even a partial payment of the debt, the foreclosure process will stop. If you can pay your debt in full, the creditor must release the lien on your home. All liens must be cleared before a home can be bought or sold and are often paid with the proceeds of the sale.

Federal liens are placed on a property when a homeowner does not pay his or her property or income tax. In that case, the government, generally the IRS, may place a lien on your home for the amount of the unpaid taxes. The tax lien grants the IRS legal claim to your property; your creditors will be notified of the lien, and your credit rating will be affected. The notice of federal tax lien stays in place only until you take action to release it such as paying off your debt. If you pay the debt within 30 days, have it adjusted appropriately, or provide an accepted bond that guarantees you will pay; the tax lien will be released. A federal lien can also be withdrawn if it is decided that the filing was not done according to procedure.

In some states a property lien may be released after a certain length of time, such as 25 years. Still, you want to avoid a lien on your property because it will restrict your ability to sell your home and make if difficult to obtain a home-equity loan or a mortgage loan.