Can a Lien Impact Your Home Refinance?

19 March 2020
 Categories: , Blog


Have you recently seen mortgage rates drop to historical lows, and now you want to refinance? This may be problematic if you have an existing lien on your home. Here is what you need to know when it comes to getting a home refinanced with a lien.

Understand What a Lien Is

If you currently have a large debt that is owed to a creditor, it is possible for them to file legal documents with the local court system to place a lien on your property. The lien means that you are unable to sell or refinance your home, which is a way to give the creditor the leverage they desire to get the money that they are owed. If you have a lien on your home, you will need to repay your debts to have the lien removed from your home. 

Apply to Have the Lien Removed

Sometimes liens are valid, while other times they are not. It could be due to a creditor that has unjustly filed a lien against you under false pretenses, or a lien that has been paid off by not properly removed. In either situation, you'll need to work with the courts to have the lien removed so you can refinance. This may involve digging up proof of payment to back up your financial records.

Pay the Debt

The other option will be to pay the debt so that the lien can be removed. If you don't have the money right away, the easiest way to pay off the debt is to put it on a credit card. However, you'll need to do some math to see if the potential interest on your credit card will be less than what you save by refinancing. If you can pay off the debt over fast enough, it may be worth it.

Another option will be to request your lender to work the cost of the lien into the refinance of your home. You would be borrowing more money, as a result, to pay off your lien, but the interest rate of building it into your refinance is going to cost less than using your credit card. 

Don't feel like you can't take advantage of historically low-interest rates just because of a lien. Talk about it with your mortgage lender and see what your refinancing loan options are. You may be surprised at how much easier this process can be with additional help and support.