Definition
A secondary lien is a legal claim to property that is only valid once the primary lien has been removed.
Analysis
A secondary lien may be placed on property as a condition for granting a loan to an applicant. It is a type of secured loan, in which the property guarantees repayment of the loan.
In the event of default, the secondary lienholder would only be repaid once the primary lienholder has received their loan balance in full. Since this is not always possible, most loans that are secondary to a primary loan would have a slightly higher interest rate.
Examples of loans that require a secondary lien include a second mortgage and a home equity line of credit (HELOC).
