Can You Refinance With a Lien on Your Home?

A lien can be a headache when refinancing a mortgage or selling a home. If you have a lien on your home and are thinking of refinancing, you may be wondering if it is possible. Will be successful? DoNotPay is here to answer these and other questions and offer faster and more efficient solutions to your home lien problems. The possibility of having your property seized can be scary. DoNotPay can help you avoid this. Continue reading to find out how.

What Is a Home Lien?

A lien on your home is a property lien that legally documents a creditor's claim to your property. Home liens can be voluntary, where the homeowner chooses to use their home as collateral, or involuntary when a lien is imposed on a property against the owner's wishes. A home lien may be a result of many things:

Failure to pay taxes.	The government can place a lien against your home as collateral. This is called a tax lien and is an involuntary lien.
Debt took to buy a home	This is called a mortgage lien and is voluntary. If you default on the mortgage, the bank can place a lien against your home, seize it and sell it to pay off the debt.
Failure to pay	Failure to pay someone who did renovations or remodeling your property, unpaid suppliers, or workers. This group of people can take an involuntary mechanic's lien against your property.
You owe child support or spouse alimony.	The court can place a lien against your property to ensure these payments are made. Like tax liens, filing bankruptcy does not discharge this kind of lien.

Refinancing a Home With a Lien Against it

Refinancing can lower your debt significantly, reduce your monthly payments, or both. Although it may seem impossible, it is possible to . Generally, lenders look to minimize losses if you default on a debt. Therefore, your possibility of refinancing a house with a lien depends on the type of lien against it. Voluntary liens, like mortgage liens, are easier to refinance as lenders are used to dealing with this kind of home lien. However, involuntary liens must be resolved before a refinancing can be completed.

Does a Property Lien Hurt My Credit Score?

Refinancing your home lien will affect your credit score. You should expect your credit score to drop. Here's why:

Multiple inquiries on your credit report. "Hard inquiries" occur when a lender looks at your credit report to determine your eligibility. Each inquiry will hurt your credit rating and stay on your credit report for two years. It would help to contact all the lenders you wish to submit your application to at the same time. If all the lenders submit requests on your credit report within two weeks, the inquiries will be counted as one hard inquiry. Thus, reducing your credit score by a few points instead of individual points spread over a long period.
Old debt becomes new debt. The original debt is closed when you refinance, and a new one is opened.

However, before submitting a refinancing application on your property, you can avoid surprises by requesting copies of your credit report from all three credit report bureaus (Equifax, Experian, and TransUnion). You are entitled to one free copy of your credit report every year. This free copy is considered a "soft" inquiry and will not affect your credit score unless you make other requests within the year. Ensure there is no incorrect information on your credit report. If there is, contact the specific bureau to dispute the error. Be prepared to provide evidence of a paid lien. You can also enlist the services of DoNotPay to help clean your credit report.

Does a Property Lien Affect Selling or Buying a Home?

Having a lien on your property means that you cannot sell the property unless the debt has been taken care of and, subsequently, the lien is removed. You are legally prohibited from selling a home with a lien on it.

How You Can Request a Home Lien Release

Depending on the type of lien, there are ways you can go about getting the lien release to refinance your home. With involuntary liens, you will need to pay the debt in full or negotiate the price down and pay to resolve it. Here are a few workarounds for home liens:

Refinancing With a Tax Lien

With a tax lien, the IRS has primary rights to the value of your home. Therefore, a lender may be uncomfortable being second in line to the IRS if your property is seized. You can solve this problem by asking the IRS to be second in line to the mortgage lender refinancing your home. The IRS might agree if your tax debt is cleared using the returns of the refinance.

Refinancing With a Mechanic’s Lien

If you cannot pay the mechanic's lien in full, you can contact the lien holder to subordinate the mechanic's lien claim to the refinancing institution. Timely payment history or a good working relationship with the lien holder can go a long way in solving this issue.

Remove a Home Lien With DoNotPay

DoNotPay can help you send a letter to the lienholder requesting a renegotiation of terms. We can also fill out a Release of Lien form and send it to your creditor to sign and remove the lien from your credit report.

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