Also known as: future advance mortgage · future advances mortgage · future-advance mortgage · open-end mortgage
Written by attorneys · grounded in primary & secondary sources — see below
A mortgage that secures not only an initial loan but also subsequent advances made by the same lender to the borrower. Validity and priority of the future advances turn on the mortgage terms and applicable state rules, which may require a stated maximum amount or limit priority to advances made before notice of intervening liens.
Fairview Manufacturing borrowed $5 million from Fusion Power under a recorded mortgage that expressly secured future advances only up to a $5 million cap. After an intervening lien was recorded against the property, Fusion Power advanced another $1 million. In foreclosure the court gave Fusion Power priority only for the initial $5 million and treated the excess advance as junior to the intervening lien.
Flagship Logistics obtained a construction loan from Foxfire Biotech secured by a recorded mortgage containing a dragnet clause. After a mechanic's lien attached and Foxfire Biotech received actual notice, it made a discretionary further advance. The later advance lost priority to the mechanic's lien because it was made after notice of the intervening interest.
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No. Priority for future advances is limited by any stated maximum amount in the mortgage and by rules that often subordinate optional advances made after the lender receives notice of an intervening lien.
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The excess is typically unsecured or junior to intervening liens because the recorded cap supplies notice to later creditors of the outer limit of the senior lien.
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Yes. In jurisdictions that condition priority on lack of notice, an optional advance made after the lender receives actual or constructive notice of an intervening lien is subordinated to that lien.
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In some states the distinction matters. Obligatory advances may keep priority even after notice of intervening liens, while optional advances generally lose priority once the lender has notice.
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