Background and legal principle

Lien priority is governed by the basic rule “first in time, first in right”: the lien recorded earlier generally outranks liens recorded later. State recording statutes and case law refine that rule, so exact outcomes can vary by jurisdiction. In practice, that means a first mortgage recorded at closing normally has superior claim over any second mortgage or HELOC recorded later. (See Consumer Financial Protection Bureau guidance on mortgage priority and second liens.)

How lien priority works in everyday lending

  • Recording: When a lender funds a mortgage or home‑equity product, it typically records a security instrument (mortgage or deed of trust) in the county land records. The recording date establishes priority relative to other recorded claims.
  • Foreclosure order: If the borrower defaults and the property is foreclosed, proceeds from the sale pay off liens in priority order: first lien, then second, and so on. Junior lienholders are paid only if there’s money left after satisfying senior liens.
  • Subordination and exceptions: Lien order isn’t immutable. Lenders can change positions by signing a subordination agreement, or by contractual provisions (e.g., in a refinance the new lender may demand priority). Certain tax liens or government liens can also take priority over private mortgages depending on federal or state law.

Who this affects

  • Homeowners taking a second mortgage, HELOC, or cash‑out refinance.
  • Borrowers refinancing an existing first mortgage who want to preserve a junior lien’s position.
  • Buyers or sellers during title searches and closing—title companies check lien priority to issue clear title.

In my practice, clients who borrow against equity without confirming lien position later found it difficult to refinance the first mortgage or sell quickly because title issues required subordination discussions or payoff of junior liens.

Key tools and strategies

  • Order a title report before borrowing or refinancing: A title search shows recorded liens and their dates. This step is essential before taking a second loan or HELOC.
  • Negotiate subordination early: If you need a new first‑priority loan (for example, a cash‑out refinance) and you have a HELOC or second mortgage, discuss a subordination agreement with the junior lender before closing. Learn more on our page about subordination agreements.
  • Consider timing: If you plan to refinance the primary mortgage, ask whether junior lienholders will subordinate. Some lenders will only agree if they see certain conditions (loan‑to‑value limits, payoff protections).
  • Use product choice to manage priority risk: A cash‑out refinance replaces the first lien and keeps its priority; a HELOC or second mortgage typically sits behind the first mortgage unless otherwise subordinated.

Practical examples

  • Typical scenario: Borrower A takes a $300,000 first mortgage. Later they open a $50,000 HELOC; the HELOC is recorded second and is subordinate. If the home sells in a foreclosure for $320,000, the first lender is paid first; the HELOC holder may receive little or nothing after senior payoff and costs.
  • Refinance complication: Borrower B wants to refinance the first mortgage but keeps an existing second mortgage. The new first lender may require the second lender to sign a subordination agreement to preserve its junior status. If the second lender refuses, the borrower may have to pay off the second lien as part of the refinance.

Common mistakes and misconceptions

  • Assuming all lenders share equal rights: They do not—priority matters. Junior liens have higher risk of nonpayment in foreclosure.
  • Skipping the title review: Skipping a title or lien search before borrowing or selling can delay closings and add unexpected costs.
  • Believing subordination is automatic: Subordination is a negotiated legal agreement, not an automatic right. Always get consent in writing.

Short FAQs

  • Can lien priority be changed? Yes—lenders can alter priority through a written subordination agreement, or by paying off and re‑recording liens. See our guide on how loan subordination affects second mortgages and HELOCs.
  • What happens to tax or judgment liens? Some government liens (tax liens) and certain judgment liens can have priority over mortgage liens depending on federal and state rules; consult a title professional or attorney for your state.

Action steps before you borrow or refinance

  1. Order a title report and review recorded liens. 2. Ask lenders about subordination policies if you have existing junior liens. 3. Talk to a mortgage specialist or real‑estate attorney when tax liens, judgments, or multiple junior lenders are involved.

Related resources on FinHelp

Authoritative sources and further reading

Professional disclaimer

This content is educational and reflects general practices as of 2025. It is not legal or financial advice. Consult a qualified attorney, title company, or mortgage professional for guidance tailored to your situation.