Mortgages and Liens: How to Tell Which Have Priority

If you are purchasing your home and you have a first and second mortgage, the first mortgage always takes top priority. This means if you home is sold the first mortgage will be the first to get paid off. If the first mortgage gets refinanced it will now fall behind the second mortgage in priority. The first mortgage holder will have to contact an officer at the company which has the second mortgage and ask them to sign a subordination agreement. This agreement basically moves the second mortgage holder back into their second place position.

Some first mortgage holders will not refinance a mortgage unless the second mortgage holder signs the subordination agreement. If a home goes through a foreclosure or is sold the mortgage in second place has a better chance of not being paid. This is a situation that mortgage companies are really aware of in today's market. Home prices are consistently falling and sometimes there is not enough equity for the first mortgage holder to get paid off.

If someone has one or more liens on a property they will have priority based on the date they were filed. It's a first come first serve. When someone wants to sell their home or refinance it any liens will have to be paid off with the proceeds of the loan. Liens will not be moved into a different position by using a subordination agreement.

A home owner can have ten liens filed on their property but it does not mean they will all be paid. It all depends on how much equity is in the home. Liens are public record therefore they can be accessed.

If you need to find out about all of the liens on a property then you can check with the county courthouse tax assessor's office.

When someone takes out a mortgage a lien can be filed after the first mortgage. If the homeowner decides to refinance a title company will always have to do a title search to find out if there are other mortgages and liens. A title search helps to determine if there are any easements, judgments, tax liens, or federal tax liens on a property. After the search is done the mortgage holder is notified about all of the liens, judgments, and other things that may be clouding the title. The mortgage holder will work to gain a clear title before refinancing the first mortgage.