Oklahoma Divorce | What to Know About Liens and Loans
When you buy a home and sign the home loan documents, the home becomes the collateral for the home loan, but you become the payor of the loan to buy the house.
The home lending company will create a lien, and the lien will be filed with the County Recorder. The lien restricts you from selling the property to someone else without first paying off the existing home loans, taxes, and any other encumbrances.
Liens and Loan Hierarchy
When there is a purchase of a house deeds and liens are created and recorded with the County, and a Lien Hierarchy is created.
In most cases, this is the new lien hierarchy:
First Position: New First Mortgage
Second Position: If there is a second mortgage (or HELOC)
This means that if you sell the house the first mortgage will be paid off first, the 2nd mortgage will be paid off second.
However, if you have tax or property tax liens these liens will automatically be moved to the first position.
The Tax Man ALWAYS Gets Their Money
For example, if you have a first and second mortgage, then have a government tax lien (because you didn’t pay your personal income tax, business taxes or property taxes) the new lien hierarchy will be as follows:
First Position: Tax Lien
Second Position: First Mortgage
Third Position: Second Mortgage.
The government will ALWAYS get their money first!
This means that if you sell your home the government is paid first, then the first mortgage and then the second mortgage. If there is anything left you will receive the balance after closing cost.
Know Your Liens and Loan Options
Should you sell the house? Can one of you refinance the house on your own? What are your options?
We recommend you have a consultation with our real estate professionals so you can understand all of your options.