Understanding the Preferred Ship Mortgage
A preferred ship mortgage is a legal mechanism that gives a lender priority over other claims in the event of a default or foreclosure on a documented vessel. This type of mortgage is “preferred” because it often takes precedence over later liens or claims—if done correctly. Proper execution is critical: without the proper setup, your mortgage may be subordinated or ignored.
When you finance a vessel, ensuring your mortgage has priority can make the difference between recovering your collateral or getting stuck behind other claims.
Why a Mortgage Must Be “Preferred”
Regular or ordinary liens may be effective, but they don’t always hold priority. A preferred mortgage:
- Secures the lender’s interest ahead of other subsequent creditors
- Must be properly recorded in the vessel documentation registry
- Offers legal protection in insolvency or enforcement scenarios
- Aligns with maritime and documentation law to guarantee priority
If the mortgage isn’t perfected or filed properly, it can lose its preferred status.