What happens to a second mortgage when a property is sold through power of sale by the first lender?

When a first mortgagee properly exercises power of sale under the Mortgages Act, a completed sale is generally intended to pass title to the buyer free of mortgages and other interests that ranked behind the first mortgage in priority, including a second mortgage. The second mortgagee does not simply lose its claim outright, though - its interest generally shifts from the land itself to any surplus proceeds left over after the first mortgage, the costs of sale, and other prior claims are paid.

This matters to a buyer mainly as reassurance: if the process was properly conducted, with the required notices given to all parties entitled to them, you should be acquiring title clear of that subordinate mortgage rather than inheriting responsibility for it. The key qualifier is "properly conducted" - if proper notice was not given to the second mortgagee or another interested party, that party may later challenge the sale, which is part of why title insurance and careful legal review of the file matter more in a power of sale purchase than in an ordinary one.

Ask your lawyer to confirm the priority of registered interests and that the required notices were given before you rely on getting title free of a second mortgage.