Finance
What is the difference between a first mortgage and a second mortgage?
AFirst mortgages have higher interest rates
BPriority in the event of foreclosure — first mortgage holders have priority claim on proceeds over second mortgage holders✓ Correct
CSecond mortgages are always smaller
DFirst mortgages require more documentation
Explanation
The priority order (first vs. second mortgage) determines who gets paid first if the borrower defaults and the property is foreclosed. First mortgage holders have a senior claim on the proceeds. Second mortgages are subordinate and carry greater risk, hence typically higher interest rates.
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