Lien Position

Lien Position & Priority: What to Expect With Your Commercial Mortgage Up to $5M

When selecting a commercial mortgage, it’s also important to understand what lien position your lender will have.

A property lien is a legal right to the property that guarantees the underlying financial obligation for the investment property – i.e., the borrower’s obligation to repay the loan. If that obligation isn’t met, the parameters of the lien dictate that the lender can seize the property that is serving as collateral for the commercial mortgage.

The execution of a lien also means that the underlying property cannot be sold by the owner without the consent of the lien holder.

The issue of lien position relates to what happens if you, as a borrower, default on your commercial property loan. The lien position is especially important to understand in bridge loans, which borrowers often seek out to help them satisfy short-term capital needs and which (for lenders) can pose a high risk of default.

In the event of default, the lien position determines who has a right to receive proceeds from the ultimate sale (or “liquidation”) of the property. In most cases, for commercial loans up to $5M, the lender will require a 1st Lien position on the property.  For construction loans, the Lender may approve a 2nd lien position. Lenders in the network specialize in first lien position mortgages.

For more information, request a quote to let help you get started toward your new commercial mortgage.