First Lien (First Position)
The senior claim against a property, repaid before all other mortgages in a foreclosure or sale. First-lien loans are the safest position and carry the lowest rates. Hard money lenders require it.
A first lien — or first-position loan — is the senior secured claim against a property. In a foreclosure or sale, the first-lien holder is paid before any other mortgage or junior lien (after only super-priority claims like property taxes). It's the safest position a real estate lender can hold, and that safety translates directly into the lowest interest rate in the capital stack.
Where it comes from
First position is established by recording order — the first mortgage or deed of trust recorded against the property holds first lien position. When you buy a property, your purchase-money loan is recorded at closing and becomes the first lien; a later home-equity loan or second mortgage records behind it.
Why it matters so much
In a foreclosure, sale proceeds flow in strict priority. The first-lien lender recovers its balance in full before a dollar reaches anyone junior. So the first-lien holder is exposed to loss only if the property sells for less than the first-lien balance — a much smaller risk than a junior lender faces.
Because of that protection:
- First-lien loans price lowest. A 30-year DSCR loan or a hard money loan in first position carries the best rate that lender offers.
- Most investor lenders require it. Hard money, bridge, and DSCR lenders almost universally demand first position — it's the security their model depends on.
A worked example
A flip's hard money loan records as the first lien at $200,000. The investor adds gap funding of $30,000 in second position. At a foreclosure sale netting $215,000:
| Lien | Position | Recovers |
|---|---|---|
| Hard money | First | $200,000 (full) |
| Gap funder | Second | $15,000 (partial loss) |
The first lien is made whole; the junior lender absorbs the shortfall.
Practical notes
- Subordination. A first-lien lender can agree to subordinate (step behind a new loan), but rarely does without consideration — first position is valuable.
- Title and payoffs. A clean title search and any required payoff of existing liens ensure your new loan truly records in first position; an overlooked prior lien can quietly outrank you.
- Refinance. When you refinance, the new loan pays off and replaces the old first lien, taking its senior spot.
If you remember one thing: first lien = first paid = lowest risk = lowest rate. It's why senior debt is the cheapest layer of any deal's financing.
Frequently asked questions
What does it mean to be in first lien position?
It means your loan is the senior claim against the property and gets repaid before all other mortgages in a foreclosure or sale (after super-priority items like property taxes). It's the safest lender position, which is why first-lien loans carry the lowest rates.
Why do lenders want first lien position?
Because it minimizes their loss exposure — they're paid in full before any junior lien, so they only lose money if the property sells for less than their balance. Hard money, bridge, and DSCR lenders almost always require first position as the foundation of their security.
How do I make sure my loan is in first position?
Through a clean title search and proper payoff of any existing liens at closing, so the new loan records ahead of everything else. Title insurance protects against an undisclosed prior lien that could outrank you. On a purchase, the purchase-money loan typically records as the first lien automatically.