What happens with a Second Deed of Trust when the First Deed of Trust is paid off?
A second deed of trust/mortgage is subordinate to the lien of the first deed of trust/mortgage. If that loan is paid off, the second lien moves up into first position and no action needs to be taken to make the second deed of trust a first deed of trust. However, if a new loan is taken and recorded, and the proceeds of that loan were used to pay of the first deed of trust, that new lender may have priority based on equitable subrogation, which literally means that the new lender steps into the shoes of the old lender, thereby gaining priority. The amount of the deposit on a land sales contract has no effect on your deed of trust.
