First Mortgage

AAA

DEFINITION of 'First Mortgage'

A mortgage in a first lien position on the property that secures the mortgage. A first mortgage has priority over all other liens or claims on a property in the event of default.

INVESTOPEDIA EXPLAINS 'First Mortgage'

If the loan to value (LTV) ratio of a first mortgage is greater than 80%, lenders generally require private mortgage insurance (PMI). In such a case, it can sometimes be economical for a borrower to limit the size of the first mortgage to an 80% LTV and use secondary financing to borrow the remaining amount needed.

The economics of paying PMI versus using a second loan largely depends on the rate at which a borrower expects the value of his or her home to increase. PMI can be eliminated when the LTV of the first mortgage reaches 78%; however, a second lien, which typically carries a higher interest rate than a first mortgage, must be paid-off, most likely through a refinancing of the first mortgage for an amount equal to the remaining balance of the both the first and second mortgages.

RELATED TERMS
  1. Private Mortgage Insurance - PMI

    A policy provided by private mortgage insurers to protect lenders ...
  2. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  3. Closed-End Mortgage

    A restrictive type of mortgage that cannot be prepaid, renegotiated ...
  4. Back-to-Back Commitment

    A commitment to make a second take-out loan that piggybacks another ...
  5. Home-Equity Loan

    A consumer loan secured by a second mortgage, allowing home owners ...
  6. Second Mortgage

    A type of subordinate mortgage made while an original mortgage ...
Related Articles
  1. Credit & Loans

    4 Steps To Attaining A Mortgage

    It starts with knowing your choices as well as your price range. We show you how to get there.
  2. Personal Finance

    Understanding Your Mortgage

    We walk through the steps needed to secure the best loan to finance the purchase of your home.
  3. Options & Futures

    Make A Risk-Based Mortgage Decision

    Find out how to choose which mortgage style is right for you.
  4. Home & Auto

    6 Tips To Get Approved For A Mortgage

    You can change your bank's answer to a loan request from 'No' to 'Yes'. Find out how.
  5. Credit & Loans

    Understanding The Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  6. It can be great to live in the moment, but the actions and decisions you make now can greatly impact your sense of financial security down the road.
    Personal Finance

    How Do Americans Keep Minimizing Their Net Worth?

    It can be great to live in the moment, but the actions and decisions you make now can greatly impact your sense of financial security down the road.
  7. Home & Auto

    Where are home values falling the fastest in the US, and why?

    Learn about the metropolitan areas in the United States experiencing the largest drops in median single family homes values in 2014 and the reasons behind it.
  8. FHA mortgages offer flexibility and low down payments, though they're often pricier than traditional loans backed by private mortgage insurance.
    Credit & Loans

    Before You Choose An FHA Mortgage: 7 Key Points

    FHA mortgages offer flexibility and low down payments, though they're often pricier than traditional loans backed by private mortgage insurance.
  9. Home & Auto

    How did the ABX index behave during the 2008 subprime mortgage crisis?

    Read about the disastrous performance of the various ABX indexes in the subprime mortgage crisis of 2008 during the middle of the Great Recession.
  10. Home & Auto

    Universal Design Improvements That Increase Your Home's Value

    Universal design improvements yield great returns for homeowners, either through increased future comfort, or broader market appeal for their home.

You May Also Like

Hot Definitions
  1. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  2. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  3. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  4. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  5. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
  6. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
Trading Center