Which mortgage to pay

When there isn’t enough money to make current mortgage payments on a first and second deed of trust, you are generally better off paying the first mortgage rather than the junior lien.  Junior lien holders are much less likely to foreclose on California real estate than the first lien holder.

Homeowners find it tempting to pay the junior lien since the monthly payment is often smaller than the payment on the first.  No matter how appealing it is to keep at least one lender current, that’s the wrong order of importance.

There are several reasons that the second lien is less important.  In a falling real estate market, there may not be enough value in the property to make it desirable for the second to foreclose.  A junior lien holder who forecloses takes the property subject to the obligation to make payments on the senior liens.  That’s often not an appealing prospect for the junior lender.

So, first things first:  pay the first mortgage, even if it leaves the junior lien in arrears.

Related posts:

1. Shed a mortgage lien in bankruptcy
2. Can Junior Mortgages Foreclose?
3. Rentals in foreclosure