What ranking means in practice
Ranking determines the order in which recovery proceeds are applied among creditors with security over the same property.
First-ranking: what it means for a lender
A first-ranking lender is paid before any lower-ranking debt. It is still not risk-free: values can fall below the total debt owed.
Second-ranking: what it means for a lender
A second-ranking lender is paid only from what remains after the first-ranking debt and recovery costs, so the buffer can be thin.
Why a higher return reflects higher risk, not compensation that removes it
A higher headline return does not reduce the probability or size of a loss. It reflects the additional risk being priced.
What to look at either way
Look at the combined loan-to-value position, especially for second-ranking, the standing and terms of any first mortgage, and the credibility of the exit.
