What Is a Junior Lien Mortgage?

If you currently have more than one mortgage on your home, one--or more--of those mortgages are considered "junior lien mortgages." This term refers only to the age of the mortgage.

How A Junior Lien Mortgage Affects You

The terms "junior lien mortgages" and "senior lien mortgages" apply only if a borrower defaults on his or her loan. If a borrower defaults, a lender may seize their property and re-sell it to recover their losses. If the borrower has more than one loan on the property, lenders use the proceeds from the re-sale to settle the oldest, or "senior," loan first. When the oldest loan is completely settled, the lender will apply any remaining proceeds towards the newer loan or loans, which they call the "junior" loans.

For example, suppose a homeowner initially applied for a mortgage in January of 2000 and then took out a second mortgage in June of 2002. The mortgage from 2002 would be the junior mortgage because it is newer.

Handling Your Junior Lien Mortgage

Whether a given mortgage is a junior or senior lien mortgage has no impact on how you handle the loan itself--it affects only how funds are distributed if you default on your loans.