Home Equity Loan - Beware of the lingering lien!
A problem that often arises when people try to refinance their
home is the discovery of a pre-existing lien from a previous loan
that was not removed by the lending company. The cost of removing
a lien and returning the title to the homeowner, a process known
as re-conveyance, is usually included in fees associated with a
home equity loan. When the loan is paid off, the lender is
generally responsible for removing the lien, so that public
records show the property to be unencumbered.
There are various reasons for why the lien isn't always removed -
oversight on the part of the lender, especially during heavy
periods of refinancing, is often the problem. Occasionally, the
problem can arise when a lender is sold to another company or
when that lender goes out of business. No matter what the cause,
a lien that hasn't been removed can come back to haunt a
If a homeowner is in the process of refinancing a home and
discovers an old lien that hasn't been removed, the entire
refinancing process can be held up for weeks. This can be
critical if the owner is trying to lock in an interest rate prior
to closing. The problem can also arise when a homeowner is trying
to take out another home equity loan, perhaps to facilitate
consolidation or home improvements.
Here are a few things you can do to avoid this problem:
- Get a copy of your credit report. If there are any errors,
particularly errors showing an open line of credit or a home
equity loan that has been paid off, contact your lender.
- Keep your paperwork from all real estate loans, even if you
have already paid them off. Then you will have them at hand
should you need to demonstrate that you have fulfilled your
- If the lien shows up on public records or a credit report,
but the original lender says that you have paid it, have them
send you a copy of their documentation regarding your
As with most issues that come up when financing or refinancing
a home, this one can be resolved by remaining diligent and
keeping proper paperwork. As always, it's a good idea to check
your credit report regularly, particularly if you plan on
taking out a loan in the near future.
©Copyright 2005 by Retro Marketing. Charles Essmeier is
the owner of Retro Marketing, a firm devoted to informational
Websites, including End-Your-Debt.com, a Website devoted to
consolidation information and HomeEquityHelp.net, a site
devoted to information on home equity loans.
MORE RESOURCES updated Wed. June / 07 / 2023
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