What is First Mortgage?

A first mortgage (also called senior secured lending) is a loan where the lender has first claim on the property if the borrower defaults. This priority position provides significant protection for investors in mortgage funds.

Key Characteristics: - First in line to recover funds if borrower defaults - Priority over all other creditors secured by the same property - Typical LVRs of 60-70% provide equity buffer - Target returns of 7-10% p.a. - Regular income from interest payments

Why First Mortgage is Considered Lower Risk: - Priority claim means higher recovery rates - Property security provides tangible backing - Conservative LVRs create buffer against value declines - Registered mortgages are legally enforceable

Risks to Consider: - Property values can decline - Borrower default still possible - Recovery takes time and has costs - Interest rate changes affect borrower ability to pay - Concentration in specific regions or property types