First mortgage is defined as the initial or primary loan that is obtained on some property. In case the home is refinanced, the mortgage that has been refinanced will be maintaining the position of the first mortgage.
The lender of the primary or first mortgage will have the first right or lien on the property in case the borrower will Default. The lender will foreclose on the given property while selling the same for recouping the investment. First mortgage services tend to be different from second mortgages.
Second mortgages can be regarded as secondary loans that are taken out against existing equity.
All mortgages tend to be liens. In other terms, these can be regarded as legally binding contracts that allows the lender to stake some claim on property in case the borrower is not making payments or not following the terms of the contract.
As the primary lien, the lender of the primary mortgage will first receive payments from the proceeds of the foreclosure auction. Lenders of lines of credit or home equity loans remain secondary.
Let us understand the first mortgage meaning with the help of an example. A person buys a home with a INR 200,000 mortgage. This is the first mortgage on the property. In the span of the next few years, the individual is capable of paying down the mortgage. He or she would now owe INR 110,000 on the primary mortgage. The property owner might opt for some remodelling. Therefore, the individual might consider taking a secondary loan of INR 20,000. This is referred to as the secondary mortgage.
In case the individual would stop making the respective house payments, the first mortgage lender will ensure a force-sale of the house for recouping the INR 110,000 before the second mortgage lender will be entitled to recover the INR 20,000 amount.
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The term first mortgage implies that there are more mortgages that you can consider. A homeowner can consider taking another mortgage as well –referred to as the second mortgage. This can take place when the initial mortgage might still be in effect.
A first mortgage or loan represents the primary debt that is owed to a property wherein the given property serves as the loan’s Collateral. On the other hand, the second or secondary mortgage refers to the junior lien that you will be taken against the property when you will still have an outstanding first mortgage.
Second mortgages serve as subordinates to the first mortgages. Therefore, for instance, if you are selling your home, any proceeds will be utilized for paying off the first mortgage, and eventually, the second mortgage.