Which type of mortgage is paid off first during the sale of a property?

In the context of a property sale, the type of mortgage that is paid off first is the first mortgage. This is because, from a priority standpoint, mortgages are typically categorized as primary and secondary. The first mortgage holds the highest priority, meaning that in the event of a sale, any proceeds from the property sale will first go toward settling the first mortgage.

When a property is sold, the lender of the first mortgage has the first claim to the sale's proceeds to recover the debt owed. Any remaining funds after the first mortgage is satisfied would then be directed toward subsequent liens, such as junior or second mortgages and any private mortgages. This prioritization is crucial in real estate transactions as it ensures that those with the most senior claims on the property are compensated first, aligning with mortgage law and industry practices.

Understanding this hierarchy is key for anyone looking to engage in real estate transactions, as it affects how the sale proceeds are allocated and can impact the overall financial strategy surrounding a property.