Q. - What Is Lien Priority and How Does It Effect Me?
A. - To explain this as simply as possible, lien priority is the position of one lien over another, which determines which gets paid first in a payoff, AND it is based on when things get recorded.
Surprised? Many people think that lien priority is based on which loan is the for the largest amount.
Well, not exactly.
When you buy a home and get a loan for the home, the lender puts a lien on the property. In this way, the property becomes collateral for the loan. So, in the event the homeowner is unable to make payments, the lender can force the sale of the home to get paid. There can be several liens at one time on a single property.
Except for tax liens which take precedence over any other lien, all other liens are prioritized according to when they were recorded. Every home owner should be aware that non-payment of taxes is one more way they can lose their property to foreclosure.
But, barring a tax lien, whoever records first would be in "Senior" position and any other liens -- as with a second mortgage, a Home Equity Line of Credit used for home improvement, or any judgments against the homeowners -- would be in "Junior" positions according to when they were filed.
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