What is the Difference Between a Lien and a Mortgage Under US Law?

A lien is a legal claim on an asset that gives a person the right to foreclose and sell your property if you don't pay a loan. A mortgage, on the other hand, is a type of lien called a voluntary lien. It allows you to borrow money to buy or repair your home and is usually part of the mortgage process when one (a lien) is placed on a property in a secured loan. A judicial embargo is an example of a general and involuntary lien, which can be applied to any of a person's assets. When you get a mortgage, you accept that the home you're buying will serve as collateral if you don't pay the loan.

The mortgagor is the party that transfers the share in the land, while the mortgage creditor, usually a financial institution, is the provider of the loan or other interest granted in exchange for the security right. The mortgage is typically paid in installments that include both interest and the payment of the principal amount that was borrowed. Failure to pay results in foreclosure of the mortgage. Foreclosure allows the mortgage creditor to declare that all of the mortgage debt is due and must be paid immediately. This is achieved through an acceleration clause in the mortgage.

The non-payment of the mortgage debt once the land is foreclosed leads to the seizure of the security right and its sale to pay any remaining mortgage debt. The foreclosure process depends on state law and the terms of the mortgage. The most common processes are legal proceedings (judicial foreclosure) or the granting of powers to the mortgagee to sell the property (foreclosure by power of sale). Many states regulate acceleration clauses and allow late payments to avoid foreclosure. Some states use instruments called deeds of trust instead of traditional mortgages. When a property is sold with multiple liens, each lien holder is usually entitled to the profits.

If they win in court, they can file a judicial lien on their real estate and, in many cases, on any personal property on their property. Mortgages are regulated by federal or state laws or agencies, depending on the law under which they were issued or established. If there are multiple liens on a property being foreclosed, state law determines their priority. There are several different types of liens, each with their own nuances, but in general, they mean that the lien holder has a right to the property in question.