Can You Do a Short Sale with Multiple Mortgages?

Homeowners facing financial hardship often turn to short sales as a way to avoid foreclosure. But when there’s more than one mortgage involved—like a home equity loan or second lien—the process can get trickier. If this sounds like your situation, you’re not alone. Here's what you need to know about doing a short sale with multiple mortgages.

What Counts as a “Second Mortgage”?

A second mortgage is any additional loan secured against your property beyond your primary mortgage. These can include:

 - Home equity loans
 - Home equity lines of credit (HELOCs)
 - Piggyback loans (common in 80/20 financing)
 - Any junior lien from a private lender or creditor
 - These loans create additional lienholders who must also agree to the terms of a short sale—making      their cooperation essential.

Can You Still Do a Short Sale?

Yes, you can do a short sale with multiple mortgages, but there’s a catch: all lienholders must approve the sale. That includes:

 - The primary mortgage holder
 - All secondary lenders
 - Any other parties with liens (such as tax authorities or HOA associations)
 - Each party will want a piece of the sale proceeds—even though there may not be much left after          the first mortgage gets paid.

Why Secondary Lienholders Might Say No

Second mortgage lenders are more likely to take a loss in a short sale because they’re lower on the priority chain. Here’s what might cause them to push back:

 - The offer doesn’t include enough to satisfy their claim
 - They believe foreclosure may yield more for them
 - They weren’t consulted early in the process
 - Working with experienced short sale professionals can help negotiate acceptable terms for all              parties involved.

What Homeowners Can Do to Prepare

If you have more than one mortgage and are considering a short sale:

 - Disclose everything upfront – Your agent and negotiator need to know about every lien
 - Gather your loan details – This includes balances, lender contacts, and account numbers
 - Request a short sale package – Start with your primary lender but expect to complete documents   - for each lender involved
 - Work with specialists – Choose a team experienced in multi-lien short sales
 - You can learn more about how the process works by reviewing our
    Short Sale Stages for Homeowners page.

What About HELOCs or Judgments?

If your second mortgage is a HELOC (Home Equity Line of Credit), it may behave more like revolving credit than a fixed loan. That means some lenders might be more aggressive about collecting—and less willing to settle. Judgment liens, like those from unpaid debts or lawsuits, must also be cleared before title can transfer.

Let the Experts Handle the Complexity

Short sales with multiple mortgages can absolutely be done—but they require coordination, negotiation, and a lot of patience. The good news? You don’t have to navigate it alone. The Short Sale Cooperative specializes in these types of cases and can help you work with all lienholders involved.

To learn more about second mortgages and lien priorities, visit www.consumerfinance.gov