What is a junior lien?

A junior lien refers specifically to a lien that is subordinate to one or more higher priority liens on the same property. This means that if the property is sold or foreclosed upon, the holders of senior liens—often the primary mortgage—get paid first before any funds are distributed to the holders of junior liens. This subordination is a critical aspect of liens because it affects the risk associated with lending and borrowing against property.

In the context of real estate, junior liens commonly come in the form of second mortgages, home equity lines of credit, or other financing that is secured by the asset but ranks behind the primary mortgage for repayment priority. Understanding junior liens is essential for both borrowers and lenders as it influences underwriting decisions, interest rates, and the overall financial structure related to property ownership.