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Definition of 'Encumbrance'

An encumbrance is a legal right or interest in property that someone else has. It can be something like a mortgage, a lien, or a lease. Encumbrances can make it difficult or impossible to sell or refinance a property.

There are two main types of encumbrances:

* Voluntary encumbrances are created by the owner of the property. This could include a mortgage, a home equity loan, or a lease.
* Involuntary encumbrances are created by a court order. This could include a judgment lien, a tax lien, or a mechanic's lien.

Encumbrances can have a significant impact on the value of a property. For example, a mortgage will reduce the amount of equity that the owner has in the property. A lien will make it difficult to sell the property without first paying off the debt.

It's important to be aware of any encumbrances that are on a property before you buy it. You can do this by getting a title search from a title company. A title search will reveal any liens, mortgages, or other encumbrances that are on the property.

If you're considering buying a property with an encumbrance, you should be sure to understand the terms of the encumbrance and how it will affect your ability to sell or refinance the property in the future.

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