Real Estate Term of the Day: First Mortgage & Second Mortgage
FIRST MORTGAGE – a mortgage that has priority as a lien over all other mortgage. In cases of foreclosure the first mortgage will be satisfied before other mortgages (Barron’s Dictionary of Real Estate Terms)
SECOND MORTGAGE – a subordinated lien (lower priority than another), created by a mortgage loan, over the amount of a first mortgage. Second mortgages are used at purchase to reduce the amount of a cash DOWN PAYMENT or in refinancing to raise cash for any purpose (Barron’s Dictionary of Real Estate Terms)
One of major contributors to the mortgage collapse of 2008 was the use of secondary financing for a down payment source to purchase homes. Check out this infographic “Morals vs. Mortgages” from GimmieTheScoop.com:
Image: Accessed via Gimme The Scoop (presented for educational and personal use only).