mortgage simple definition: What is Mortgage Priority?

What is Mortgage Priority?

What is Mortgage Priority?. Finance: What is Collateralized Mortgage Obligation (CMO)?

What is Mortgage Priority? video duration 1 Minute(s) 38 Second(s), published by Alexis Assadi on 16 04 2018 - 14:00:08.

https://www.alexisassadi.net/free-video/ Hey, it's Alexis Assadi
In this video, I'm going to explain the difference between a first, second and third mortgage Finding the right people to help you on the home buying journey can be challenging
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Hey, it’s Alexis Assadi.

In this video, I’m going to explain the difference between a first, second and third mortgage. This is a concept called lien priority.

A mortgage is a legal instrument used to secure a debt. When a mortgaged property is sold, the proceeds must first be used to repay the debts that have been registered against it. Those debts are typically:

Loans
Court judgements
And unpaid taxes

But what happens if a property has multiple registered debts? Which ones get paid first?

Registered debts are paid in chronological order. The first debt that was registered gets paid first. The second debt gets paid second, etc.

For example, let’s say I have a $100,000 house with the following registered debts:

A $50,000 first mortgage from 2010
A $20,000 court judgement from 2015
A $10,000 second mortgage from 2017

If I sold my house for $100,000, those debts would be repaid chronologically, and I would keep the remaining $20,000.

But now let’s imagine that I didn’t pay a $30,000 tax bill. The government might place a $30,000 lien on my house. In many cases, tax debts can skip the line and take the first position. If I sold my house for $100,000, there would only be enough equity to pay:

$30,000 to the government
$50,000 to the first mortgage
$20,000 to the court order

The mortgage in 2017 would not receive any proceeds. That lender would have to find another way to recoup its money.

If you’re a private lender, it’s thus important to verify whether the borrower has any tax debts. This should extend to any businesses that she serves as a director of, because tax bills can pierce the corporate veil.