Posted by Paul on May 11, 2000 at 14:36:04:
The 1st, 2nd, 3rd, etc., refers to the chronological order in which the mortgage is officially recorded. The mortgage doesn’t actually say “1st” or “2nd” on the document. The 1st mortgage holder has first rights to proceeds from a foreclosure and has the least risk. So as you go down the food chain, 2nd mortgages generally have higher interest rates than 1st, etc. There are often benefits to getting 2nd or 3rd mortgages rather than refinancing and having one 1st mortgage. For example - if you have a 1st mortgage that has a really low rate (as I do with my own home 5.75% for 15 years), you’d be better off getting a 2nd even with a higher rate.
Hope that helps.