Subordination Agreement
Description Subordination Deed Sample
How to fill out Subordination Deed Of Trust?
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Subordination Deed Statement Other Form Names
Subordination Agreement Sample FAQ
Despite its technical-sounding name, the subordination agreement has one simple purpose. It assigns your new mortgage to first lien position, making it possible to refinance with a home equity loan or line of credit.
A subordination agreement is a legal document that establishes one debt as ranking behind another in priority for collecting repayment from a debtor. The priority of debts can become extremely important when a debtor defaults on payments or declares bankruptcy.
A subordination clause or subordination agreement is used to lower the priority of a first recorded deed of trust or mortgage in favor of a later or junior recorded deed of trust or mortgage.
A subordination agreement prioritizes collateralized debts, ranking one behind another for purposes of collecting repayment from a debtor in the event of foreclosure or bankruptcy. A second-in-line creditor collects only when and if the priority creditor has been fully paid.
The borrower (trustor) benefits the most from a subordination clause since this makes it easier to obtain an additional loan on their property. For example, the buyer of vacant land can obtain a construction loan more easily if the loan against the land will be subordinated to the construction loan.
A Subordination Deed includes provisions where the junior creditor agrees not to be paid by the debtor until the senior creditor has been repaid in full.
A subordination clause or subordination agreement is used to lower the priority of a first recorded deed of trust or mortgage in favor of a later or junior recorded deed of trust or mortgage.