What is a junior lien?

A junior lien is a type of lien that is subordinate to a senior lien or first lien. It means that in case of default by the borrower, the senior lienholder has the first right to claim the property and recover their money before the junior lienholder.

Examples of junior liens include second mortgages, home equity lines of credit, and secondary loans taken out on a property. They are generally considered riskier than senior liens, as they may not receive full payment in the event of foreclosure or bankruptcy.

Lenders offering junior liens may charge higher interest rates or fees to compensate for the increased risk. Borrowers should carefully consider their financial situation and ability to repay before taking out a junior lien.