Walk through a fresh mortgage-priority hypo with examiner-style analysis on the purchase-money mortgage exception, prior judgment liens, and recording-statute traps.
In 2021, Greenway Bank obtained a $50,000 judgment against Tomas in Cobble County and recorded the judgment promptly. Under the state's judgment-lien statute, the recorded judgment created a statutory lien on any real property Tomas owned then or thereafter acquired in Cobble County. At the time of recording, Tomas owned no real property in the county. In March 2024, Tomas decided to buy a house at 14 Larkspur Lane in Cobble County for $300,000. He applied to Riverline Mortgage for a $240,000 loan secured by a mortgage on 14 Larkspur Lane. The closing occurred on March 18, 2024. At the closing table Tomas signed and accepted the deed conveying title to him; immediately and as part of the same transaction he signed and delivered the Riverline mortgage. Riverline recorded its mortgage on March 22, 2024. Greenway now claims its 2021 judgment lien attached to 14 Larkspur Lane the instant Tomas took title and is senior to Riverline's later-recorded mortgage.
Riverline's purchase-money mortgage has priority over Greenway's earlier-recorded judgment lien. Greenway's lien attaches to 14 Larkspur Lane only to the extent of Tomas's equity junior to the Riverline mortgage. The general rule is "first in time, first in right" — recorded interests take priority based on the order of recording, subject to the recording statute. A purchase-money mortgage is a critical exception. A purchase-money mortgage is one given by the buyer at the time of acquisition to either the seller or a third-party lender whose loan funds enabled the acquisition. A purchase-money mortgage takes priority over any prior judgment lien against the borrower personally, even when the prior lien is recorded earlier. The doctrine's rationale is straightforward: without the lender's money, the borrower would never have acquired the property in the first place, so there would be nothing for the prior judgment lien to attach to. The purchase-money lender is therefore treated as senior to all pre-acquisition liens against the borrower.
Canonical URL: https://www.barprepplay.com/mbe/real-property/mortgage-priority-purchase-money/
Does Greenway's pre-existing recorded judgment lien have priority over Riverline's later-recorded mortgage given to enable Tomas to buy 14 Larkspur Lane?
The general rule is "first in time, first in right" — recorded interests take priority based on the order of recording, subject to the recording statute. A purchase-money mortgage is a critical exception. A purchase-money mortgage is one given by the buyer at the time of acquisition to either the seller or a third-party lender whose loan funds enabled the acquisition. A purchase-money mortgage takes priority over any prior judgment lien against the borrower personally, even when the prior lien is recorded earlier. The doctrine's rationale is straightforward: without the lender's money, the borrower would never have acquired the property in the first place, so there would be nothing for the prior judgment lien to attach to. The purchase-money lender is therefore treated as senior to all pre-acquisition liens against the borrower.
Tomas's deed and Riverline's mortgage were executed simultaneously at closing as part of the same integrated transaction. Riverline's loan was the source of $240,000 of the $300,000 purchase price; without it Tomas could not have acquired 14 Larkspur Lane. Riverline therefore holds a purchase-money mortgage. Greenway's 2021 judgment lien predates Riverline's mortgage in the recording order, but the purchase-money exception specifically subordinates pre-acquisition judgment liens to the PMM. Greenway's lien attaches to the property only to the extent of Tomas's equity AFTER the PMM is satisfied. The recording timing does not change this — the PMM exception operates regardless of whether Riverline's mortgage is recorded before or after the deed, so long as the loan was contemporaneous with acquisition and funded the purchase.
Riverline's purchase-money mortgage has priority over Greenway's earlier-recorded judgment lien. Greenway's lien attaches to 14 Larkspur Lane only to the extent of Tomas's equity junior to the Riverline mortgage.
That ignores the purchase-money mortgage exception. PMMs override pre-acquisition liens against the borrower regardless of recording order.
PMM status depends on the loan funding the acquisition, not on the order of recording. Most jurisdictions treat the deed and PMM as effectively simultaneous parts of the same transaction.
A third-party lender whose money funds the acquisition is a PMM lender on the same footing as a seller mortgagee. Both qualify under the doctrine.
No consent from the prior judgment creditor is required. The PMM exception operates by law regardless of the prior lienholder's consent.