A first mortgage refers to a home loan that has first-priority lien against a property, making the lender the first in line for claims against it should the borrower default.

This lien can only be removed after the loan against property is fully repaid.

From the business perspective of a lender, the goal or best case scenario is always to be the first mortgage.

This is why lenders of second mortgages often offer borrowers an incentive should they be able to convince a first lender to subordinate their liens to second place.

For example, if a house is valued at $150,000 with a outstanding first mortgage of $120,000 and second mortgage for $40,000, should there be a foreclosure, the first lender will be able to get back the whole $120,000 plus expenses and unpaid interest, while the second lender will get to scrape up what’s left.