SECOND MORTGAGE. A charge upon property which ranks after a first mortgage. For example, if Brown gives Jones a legal mortgage upon his property, and afterwards gives his banker a second mortgage, the banker's charge is available only after Jones is fully satisfied either by having received repayment of the debt, with interest from Brown, or by having enforced his mortgage and obtained repayment out of the security.
All mortgages after the first legal mort gage are called equitable mortgages (q.v.).
A prudent banker avoids, as far as pos sible, taking a second mortgage as security. It is, as a rule, a most unsatisfactory form of security, and the less a banker has to do with second mortgages the better.
Where a second mortgage is taken, notice must be given to the first mortgagee, other wise he might, without notice, make a further advance to the mortgagor, or he might buy up a subsequent mortgage and tack it on to his own, and in either case the second mortgagee would be squeezed out of any value there was in his charge. If the mortgagor
fails to pay his interest regularly to the first mortgagee, the amount of interest in arrears will increase the amount of the first charge, and, when it comes to a question of selling the property, the first mortgagee will be quite satisfied if he can obtain from the sale repayment of the money he has lent upon the property, without concerning himself with the interests of any subsequent mortgagee.
Instead of allowing the first mortgagee to sell, a banker holding a second mortgage might, perhaps, be tempted to pay off the first mortgage, in the hope that he may, ultimately, be able to find a purchaser for the property at a price sufficient to cover both the amount of the first mortgage, taken over by him, and his own debt. Such an operation, however. may result in the banker finding that his last state is worse than the first. (See MORTGAGE.)