Hola Victor,

As Damon correctly pointed out, any surplus from a foreclosure sale on a junior lien (like a second mortgage) will never be applied to the superior lien balance. The overage, by law, goes back to the homeowner (or potentially other junior lienholders if they file claims), not to reduce the first lien. That means you must be ready to satisfy the first mortgage in full yourself.

That said, if your analysis shows that even after paying off the first lien you still have solid equity, then it can definitely be a profitable play.

Here’s a tactical angle: in many cases, experienced investors prefer to wait and bid at the first mortgage foreclosure sale, since it wipes out the junior liens and feels more straightforward. As a result, the second-lien auction often draws little competition, which could allow you to win the property at a very low bid. If that happens, you’d then cover the first mortgage, cancel both liens, and keep whatever equity remains as profit.

The key is making sure your equity cushion is strong enough to justify taking on the risk, because in these scenarios, you’re effectively stepping into the borrower’s shoes against the first mortgage holder.