It basically means a house that is clear of debt or claims from third parties.
Whether a property is unencumbered plays a very important role in various aspects regarding the property.
For example, when a bank is structuring a home equity loan to a borrower, or when a property being sold actually has a third party owner who don’t know of the sale.
This also means that a property that has third party claims against it would be considered as encumbered property.
When a bank which is in the process of positioning itself as the mortgagee of a property, discovering that the property is actually encumbered can often lead to outright rejection unless the claimant can be removed legally.
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