First lien vs. second lien: What’s the difference?

When you take out a mortgage or any other secured loan on your home, your lender places a lien on the property. A lien is a legal claim that allows your lender to recoup its losses if you default on the mortgage.

If you have a second mortgage, such as a home equity loan¹, each loan will have its own lien on the property. If you default on your mortgage, the lender with the first lien has priority to recoup its losses. If the home is sold and the proceeds are insufficient to cover both liens, the first lienholder will be paid in full, and the second lienholder will be paid from what’s left over.

Some loans require the first lien position as a condition of approval, so knowing how liens work can help you navigate the process of buying, selling, refinancing, or borrowing your home equity.

How does a lien work?

When a lien is placed on your home, it gives the lienholder a legal claim to your property until the lien is paid.

For instance, if you sell your home, the lien must be paid first from the proceeds, reducing any profit you might make. If you default on your loans, liens determine the order in which creditors are paid from the sale of your home.

The two most common types of liens are:

• Mortgage liens. If you finance your home, the property itself serves as collateral and your lender creates a mortgage lien. This gives the lender the right to foreclose on and sell your property to recover its money if you default.
• Tax lien. If you fail to pay your property taxes, the government can place a tax lien on your property. A tax lien takes priority over other liens. In extreme cases, the government can force the sale of your home to collect back taxes and penalties.

What is a first lien?

The first lien is the lien that is recorded first. This is usually the homeowner’s primary mortgage. The first lien position is important because if you sell your home or it goes into foreclosure, this loan gets paid first.

What is a second lien?

A second lien, sometimes called a junior lien, is for any loan you take out in addition to your primary mortgage. Home equity loans and home equity lines of credit (HELOCs) are typical second liens.

Lenders treat second liens differently. If you default, the second lien is paid only after the first lien is paid – and only if sufficient funds remain to cover it.

Here’s a simplified example: A homeowner defaults on a home that the bank forecloses on and sells for $400,000. There is a first lien on the property for $380,000 and a second lien for $40,000. After the first lien is paid in full, the second lienholder receives the rest, which is only half of what it’s owed.

This is why interest rates on home equity loans and HELOCs usually are higher than rates for first mortgages and refinances. There’s more risk to the lender, and for that, you are charged a premium in the form of a higher interest rate.

Rocket Mortgage^® does not offer HELOCs currently.

Why lien position matters to borrowers

Lien position doesn’t just matter to lenders. Multiple liens can have a serious impact on you as a borrower as well.

It determines your ability to refinance

If you refinance your mortgage, the new lender will want the first line because it’s the least risky. If the title search reveals a second lien, your lender may require the second lienholder to sign a subordination agreement, which would establish the new primary loan as the first lien. If the second lienholder refuses, your refinance may not be approved.

It affects your borrowing power

A second lien means you have more than one loan on a property, which means an additional monthly debt to pay and less equity in your home. This extra debt can affect your ability to get a new auto loan, personal loan, or credit card. Rocket Mortgage provides a home equity calculator to help you better understand your financial options.

The risk of foreclosure rises

A second mortgage payment means you’ve taken on more debt, which increases the risk to borrowers of foreclosure. More debt will increase your debt-to-income ratio, which can make it more challenging to qualify for a new loan or other types of credit. You want to do everything you can to avoid foreclosure. Fortunately, there are options available, such as loan modification, forbearance, repayment plans, refinancing, and more.

It influences the selling of a home

When you sell a house with a mortgage, all outstanding liens must be paid before you receive any of the proceeds. This includes the balance on your first and second mortgages. More debt means you keep less when you sell your home. If you owe more than your home is worth, you may need to pay your liens out of pocket.

What happens if you can’t pay the first or second lien?

If you default on your mortgage or second lien, the lender can foreclose on your property and sell it to recoup its losses.

And because the lien is on the property, not on you as an individual, the mortgage passes through bankruptcy. In other words, even if you declare bankruptcy, the lien survives , and the lender has the right to be paid from the sale of your property.

The first lienholder is paid first. If enough is left over, the second lienholder is paid. This is why a lien order is important to lenders.

FAQ

Here are answers to common questions about first and second liens.

Can I refinance my first mortgage if I have a second lien?

Yes, but refinancing with a second lien on your property usually requires a subordination agreement that allows the new primary mortgage to retain the first lien position.

What happens to a second lien in a foreclosure?

The first lienholder is paid first. The second lienholder is paid if enough proceeds are left from the sale. This is why lenders consider second liens riskier.

Is a HELOC a second lien?

Yes, unless the home is paid off and owned free and clear. If a mortgage exists, HELOCs, home equity loans, and other loans may result in second liens. Because of this, lenders consider them riskier, which is why they typically have higher interest rates than first mortgages.

Can a second lienholder foreclose?

Yes, but it’s rarer for this to happen. This is because when the second lienholder forecloses, the first lienholder gets paid off first, even if you are not behind on those payments. So, for a second lienholder to foreclose when you don’t pay them, they must believe your home is worth enough to pay off both the first mortgage and their lien.

The bottom line: The first lien takes priority over the second

When you have more than one loan on your home, lien position matters to lenders. That’s because first liens, like the mortgage you took out to buy your house, get paid first. Since home equity loans and other loan types create second liens, lenders consider them riskier. That affects you because it usually results in higher interest rates.

This is why, if you are considering a home equity loan, it’s important you shop around and use a reputable lender. Explore your options with Rocket Mortgage today.

¹Home Equity Loan product requires full documentation of income and assets, credit score and max loan-to-value (LTV), combined loan-to-value (CLTV), and home equity combined loan-to-value (HCLTV) ratios. Requirements were updated 11/19/25 and are tiered as follows: 680 minimum FICO with a max LTV/CLTV/HCLTV of 80%, 700 minimum FICO with a max LTV/CLTV/HCLTV of 85%, and 740 minimum FICO with a max LTV/CLTV/HCLTV of 90%. Your debt-to-income ratio (DTI) must be 50% or below. Valid for loan amounts between $45,000.00 and $500,000.00 (minimum loan amount for properties located in Michigan is $10,000.00). Product is a second standalone lien and may not be used for piggyback transactions. Product not available on Ameriprise products. Guidelines may vary for self-employed individuals. Some mortgages may be considered “higher priced” based on the APOR spread test. Higher priced loans are not allowed on properties located in New York. Additional restrictions apply. This is not a commitment to lend.

Refinancing may increase finance charges over the life of the loan.

This article is for informational purposes only and is not intended to provide, and should not be relied on for, medical, legal, financial, or tax advice. You should consult with a qualified professional for advice specific to your situation. Consumers should independently verify that any services, products, or programs referenced meet their needs and comply with applicable requirements.