What does Lien Priority refer to?

Lien priority refers to the chronological order in which liens are filed against a property. When multiple liens exist on a property, lien priority determines the order of claims to the property's value in case of foreclosure or sale. The first lien filed generally has the first right to be paid from the proceeds of the sale, followed by subsequent liens in the order they were recorded. This concept is crucial for mortgage professionals and borrowers alike because it influences the risk associated with financing and the hierarchy of claims on the property.

Understanding lien priority is essential in situations such as foreclosure, where different lienholders will seek repayment from the proceeds of the sale. The implications of lien priority become especially significant when evaluating the risk of secondary financing or equity lines of credit, as a lower priority lien may have a higher risk of loss if a property’s value decreases or if foreclosure occurs.