Property loans are provided on the basis that the Lender will have legal control of the real estate owned by the Borrower such that in the event that the Borrower defaults on the loan, the Lender has the right to liquidate the real estate to recover the value of the loan. In this instance, the Lender is known as the Senior Lender who has the first legal charge on the real estate.
In other instances, the Borrower may choose to take an additional loan secured on the property from a second Lender. This would mean that there are now two Lenders on the property. This second Lender is known as the Junior Lender who has the second legal charge on the real estate.
In the event that the Borrower defaults on the loan and the real estate has to be liquidated to repay the Lenders, the Senior Lender will be the first to be repaid, followed by the Junior Lender.
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