A junior mortgage is a mortgage that is subordinated to some other mortgage or lien. Subordinated debt such as a junior mortgage is paid after unsubordinated, or senior, debt. The junior mortgage is sometimes called a second mortgage. The senior mortgage is called the first mortgage. It is possible for a property to have more than one junior mortgage. If a second mortgage already exists, the next junior mortgage would be called the third mortgage and be subordinated to both the first and second. A junior mortgage has a higher risk of default, and this risk is usually offset by a higher interest rate. Sometimes a junior mortgage and first mortgage can be consolidated through refinancing to lower the cost of borrowing by eliminated subordinated debt. |
