Order of liens

Property liens are normally recorded and satisfied in chronological order: "first come, first serve." A first mortgage loan, for example, holds the first lien position against a property. A second mortgage loan is recorded in the second lien position. When a property is sold, all the funds will pay off the first lien debt; any funds remaining will then be used for the next lien, etc.

The exception, of course, is the government. Taxes owed to the government normally take primary lien in effect, the government always cuts to the front of the line.

First mortgages always want to be first in line—i.e., they want to have first lien. If other liens already exist when a homeowner applies for a first mortgage loan, the borrower must satisfy or subordinate the other liens.

Thus, if a homeowner has both a first and junior mortgage but refinances only the primary mortgage, the junior mortgage must be subordinated to the new first mortgage. The lien subordination agreement (issued by the junior mortgage to be subordinated) will then be recorded into the county records so that the new order of liens becomes official.

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