United States
Hong KongTitle, liens and priority
Lien priority generally runs by recording order, but property tax liens usually take priority regardless. A subordination agreement lets a lienholder move behind another, which is what makes refinancing a first mortgage possible with a second in place.
Priority decides who gets paid when there is not enough money for everybody. It is the reason title work exists.
The general rule
First in time, first in right. Priority runs by the order liens were recorded.
Recording is what makes a lien effective against third parties, which is why it happens promptly after closing rather than at leisure.
The exceptions
| Lien | Priority |
|---|---|
| Property tax liens | Usually take priority regardless of recording date |
| Mechanics liens | May relate back to when work began, by state law |
| Purchase money mortgage | Priority over prior claims against the buyer in many states |
The tax lien exception is the one that matters most to lenders. Unpaid property taxes can jump ahead of a first mortgage.
What the title search finds
Ownership, and everything claimed against the property: mortgages, judgments, tax liens, easements, restrictive covenants, and any defect in the chain of title.
A lender's policy protects the lender for the loan amount. An owner's policy protects the buyer and must be bought separately. A borrower paying for the lender's policy is not insured by it, which surprises people.
Subordination
A second lienholder agreeing to stay behind a new first mortgage. Without it, paying off the old first would promote the second into first position, which no refinancing lender would accept.
That is why a refinance with a home equity line in place needs the line's lender to sign, and why those requests hold up closings.
Common questions
How is lien priority determined?
Generally by recording order - first in time, first in right - with exceptions for property tax liens and, in some states, mechanics liens.
Do property taxes outrank a mortgage?
Usually yes, regardless of when the mortgage was recorded.
What is a subordination agreement?
An agreement by a lienholder to stay behind another lien, commonly needed to refinance a first mortgage with a second in place.
Does a lender's title policy protect the buyer?
No. An owner's policy is separate and must be purchased.
Why does recording matter?
It makes the lien effective against third parties and fixes its position in priority.