A first mortgage, as the name suggests, is the primary lien against your property that helped secure a mortgage. If you default or decide to sell the property, the first mortgage must be paid before any other liens on the property. The loan used to purchase a home is secured by the first mortgage.
For example, if you buy a home that costs $200,000 and put a down payment of $30,000, you can pay the remaining $170,000 with the first mortgage. If you obtain a mortgage several years later, this will be counted as the second mortgage.
If a lender is forced to foreclose on the mortgage and only made $175,000 through the sale, the holder of the first mortgage would have to be repaid first in full which is at $170,000. The remaining $5,000 will be given to the holder of the second mortgage.
First Mortgage Features
The borrower must sign a promissory note to obtain a mortgage loan. This acts as a promise to repay the borrowed amount according to the terms stipulated in the note.
The borrower must sign a mortgage deed that will give the lender a lien on a property. In the event of a non-repayment or default, the lender can sell the property so they can recover the amount indicated on the promissory note and one that should have been paid to them.
In a first mortgage, the first mortgage lender must first be fully satisfied with the payments made before any other lenders can use the same property (collateral) to recover their losses.