In a Home Equity Line of Credit (HELOC), what generally positions it in relation to the first mortgage?

In a Home Equity Line of Credit (HELOC), it is classified as a second lien. This means that it is subordinate to the first mortgage on the property. When a homeowner takes out a HELOC, they are essentially borrowing against the equity they have built up in their home, which is the difference between the current market value of the home and the outstanding balance of the first mortgage.

As a second lien, if the homeowner were to default on both loans, the first mortgage lender would have the right to be paid off first from the proceeds of any property sale. Only after the first mortgage has been settled can the HELOC lender claim any remaining funds. This positioning is critical for borrowers to understand, especially regarding risks and responsibilities associated with multiple liens on a property.