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How a First-Lien Mortgage Protects a Private Lender

September 30, 2026
GLENN TELLIER
GAP Investments
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When you lend against real estate, the order of claims on the property matters as much as the property itself. A first-lien mortgage puts the lender at the front of that line. This article explains what first position means for a private lender in Costa Rica, how it is put in place at closing, and what else protects a GAP lender.

What “first lien” means

A property can carry more than one mortgage or lien. The one in first position ranks ahead of the others: if the property ever has to be sold to repay debts, the first-lien lender’s claim comes before later liens. A lender in second position is paid only after the first lender.

On every standard GAP loan, the lender holds a first-lien position. GAP does not arrange second-position loans.

For GAP’s complete loan rules and what happens in a Costa Rica foreclosure, see What happens if a borrower doesn’t pay? How your loan is protected in Costa Rica.

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How first position is created at closing

First position is not assumed; it is arranged. Before closing, the property’s registry record is checked for existing mortgages and liens. Anything that would rank ahead of the new lender must be paid off before or at closing, often from the loan’s own proceeds.

An attorney and notary then document the loan and register the lender’s mortgage in the National Registry. Under Law 3883, the Registry’s purpose is to guarantee the security of registered property and rights with respect to third parties by making them public. That public record is what lets anyone who later looks at the property see your mortgage.

Confirmed after closing

A mortgage protects you once it is registered. After closing, GAP’s lawyers confirm that the registration is complete and that your mortgage appears in first position in the National Registry.

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Why a first-lien mortgage works together with loan-to-value

Position decides the order of claims; loan-to-value decides how much value stands behind yours. GAP prefers around 30% loan-to-value or less and treats 50% as the maximum. A first-lien loan at 30% leaves a large cushion for price changes, selling costs and time. A first-lien loan at a high loan-to-value leaves much less.

GAP determines the value used for the loan with the lender’s input and acceptance, so you are part of that decision before you fund.

What a registered first-lien mortgage lets you do

Under the Código Procesal Civil (Law 9342), a registered mortgage is an enforceable title (article 166): if a borrower stops paying, the lender goes straight to enforcement in court, and the property is sold at a court-run auction. What happens if a borrower doesn’t pay? explains every step, including who is paid first.

What works alongside first position

First position decides the order of claims. Three more things make it strong on every GAP loan: a conservative loan-to-value, a title GAP’s lawyers have reviewed, and a borrower with a named exit plan. If a borrower ever stops paying, the lender is paid from the auction before any remainder goes back to the borrower, and if nobody bids after three auctions the court awards the property to the lender. GAP and its lawyers handle the enforcement if it is ever needed.

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Mortgage or guarantee trust?

Every GAP loan is secured by a registered first-position mortgage. Guarantee trusts are another structure some lenders ask about; mortgage or guarantee trust compares the two, and how private loans are secured covers the full picture.

Frequently Asked Questions

Are all GAP loans first lien?

Yes. On standard loans the lender always holds a first-lien position, and GAP does not arrange second-position loans.

What happens to an existing mortgage on the property?

It must be paid off before or at closing so the new lender is registered in first position.

What protects me if the borrower stops paying?

The property. Your first-degree mortgage is enforced in court, the property is auctioned, and you are paid before any remainder goes back to the borrower.