What is a lien?

A lien is defined as a legal claim on an asset to secure a debt. This means that if a borrower fails to meet their obligations, the lender can enforce the lien to obtain payment by potentially taking possession of the asset in question. Liens are critical in real estate transactions because they provide a way for creditors to secure interest in a property until the debt is paid off.

The concept of a lien is foundational in finance, as it assures lenders that they have a claim on the property, which can also influence the borrowing terms and conditions. Understanding liens is essential for anyone involved in real estate, as they can affect ownership rights, transferability of property, and the ability to secure additional financing.