Pay my First Mortgage but not my Second

What happens if I pay my first mortgage, but not my second?

1 Answer

You should examine the terms outlined in your mortgage deed [or deed of trust] and promissory note.  Often there is a cross default clause contained in the document.  Simply put, if you are in default on any obligation tied to the property, you can be deemed to be in default on the first mortgage even if you are current on that loan and have never been late with a payment.  That said, for the second mortgagee to enforce the terms of the default, it would need to take over 1st position by satisfying the balance of the first mortgage.  If there is not sufficient equity in the home, the 2nd mortgagee may choose other methods to collect the balance owed.  

Obviously, the credit reporting agencies will be informed about the status of the second mortgage and that will have an effect on your credit scores.  The best course of action is to be in touch with both the first and second mortgage holders to outline your present circumstances and what kind of game plan can be worked out to get you back on track.  Consulting with legal counsel may also be advisable before you choose to not pay a creditor who has a security interest in your home.