• Robert Floris CFP, AMP
    Lead Mortgage Agent
    M08004919
    905-574-9200 Ext. 215

  • Mortgage vs Lien | What Is The Difference?

  • Mortgage vs LienMortgage vs Lien

    When comparing a mortgage vs lien they are similar in the sense that they both entail placing an legal encumbrance on your property or asset. But that’s pretty much where the similarity ends.

    Mortgage

    To help compare a mortgage vs lien, let’s first discuss what a mortgage is. A mortgage is a LOAN that is secured against your home. In other words, the mortgage lender uses your home as “collateral” for the loan AND places a lien on your home. This entitles you to a better rate than you would get on an unsecured loan (like a credit card) because there is less risk. If you do not pay your mortgage per the agreement with the lender, it can go power of sale where they essentially force you to sell your home to recover their money.

    Lien

    Now let’s talk about the lien part of the mortgage vs lien comparison. A lien is NOT a loan, but it is still a legal encumbrance that is place on your asset(s) (not necessarily a home). When a lien is placed against your asset, the person who placed the lien there is kind of in line to be paid first.

    Example Of A Lien

    For example, in our Mortgage Architects office on the East Hamilton mountain, we often see this situation where we cannot place a mortgage on a home because the home has a rented water heater in it. How is this possible? Well, the provider of the water heater has placed a lien on the person’s home to protect their property. This prevents the homeowner from putting a mortgage on the home because the mortgage lender wants to be first in line. But that position is already taken by the water heater company!

    Postponement Of A Lien

    In cases like the example above, we will ask the water heater company for a “postponement”. That’s a fancy way of asking the water heater to let the mortgage lender bud in front of them. Thankfully, they will always allow this to happen UNLESS the homeowner is not in good standing with the water heater company. In which case, the homeowner or purchaser will settle their arrears with the company so that they can proceed with the mortgage.

    The Power Of A Mortgage vs Lien

    So a lien does not have as much “power” as a mortgage, but they can be a nuisance and they are used as security to force the person to make sure they pay their debts. Otherwise, they are essentially “held hostage” until they come clean.

    Robert Floris is a Mortgage Broker. His office is located at 651 Fennell Avenue East in Hamilton, Ontario. If you would like to speak with Robert, he can be reached at 905-574-9200 #215. Alternatively, you can contact Robert here.

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