The piggyback mortgage

Here's an example:

A homeowner has a first mortgage registered against his property. He wants to borrow some money so gets it from a private source and signs a mortgage deed that is registered as a second mortgage.

In this deed, there will be a clause requiring the mortgagor to do one of the following:

• Provide the mortgagee in the second mortgage with monthly payments made payable to the first mortgagee, which the second mortgagee will post immediately to the first mortgagee.
• Provide the mortgagee in the second mortgage with proof positive that the monthly payment on the first mortgage has been made. It will require that the proof be supplied within a specified period of time.

In other words, the second mortgagee is constantly on the borrower's back to ensure that the senior mortgage is always in good standing.

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