A California Subordination Agreement is a legal contract used to establish the priority of mortgage liens on a property when refinancing or obtaining a new mortgage loan. In this agreement, the existing mortgage is subordinated to the new mortgage, meaning that the new lender's lien takes precedence over the existing lender's lien. This type of agreement is crucial in situations where a homeowner wants to refinance their existing mortgage or obtain a new loan while maintaining the current mortgage's lien position. By subordinating the existing mortgage, the homeowner can ensure that the new lender's loan will be the primary lien on the property. The California Subordination Agreement outlines the terms and conditions under which the existing mortgage will be subordinate to the new mortgage. It addresses important details such as the names of the parties involved, property description, loan amounts, interest rates, and any additional terms agreed upon by the parties. There are different types of California Subordination Agreement Subordinating Existing Mortgage to New Mortgage, including: 1. First Mortgage Subordination Agreement: This is the most common type of subordination agreement used when a homeowner wants to obtain a new first mortgage loan while keeping the existing mortgage in place. 2. Second Mortgage Subordination Agreement: Sometimes, homeowners may already have a second mortgage or home equity line of credit (HELOT) in addition to their primary mortgage. In such cases, a second mortgage subordination agreement is needed to ensure that the new loan remains in first position, while the existing second mortgage remains subordinate. 3. Reverse Mortgage Subordination Agreement: When a homeowner decides to apply for a reverse mortgage, which allows them to convert their home equity into cash, any existing mortgage must be subordinated to the reverse mortgage loan. This ensures that the reverse mortgage lender's lien takes priority. 4. Construction Loan Subordination Agreement: In situations where a property is undergoing significant construction or renovation, a construction loan may be necessary. A construction loan subordination agreement is used to subordinate the existing mortgage lien to the construction loan to accommodate the building process. In summary, a California Subordination Agreement Subordinating Existing Mortgage to New Mortgage is a legal document that establishes the priority of mortgage liens on a property when refinancing or obtaining a new loan. It ensures that the new loan's lien position is superior to the existing mortgage, and various types of subordination agreements exist based on the specific circumstances, such as first mortgage subordination, second mortgage subordination, reverse mortgage subordination, and construction loan subordination.
California Subordination Agreement Subordinating Existing Mortgage to New Mortgage
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FAQ
A subordinated loan agreement (SLA) must be filed with NFA at least ten days prior to the proposed effective date of the agreement.
Subordination agreements may be included in existing deeds of trust or may be outlined in an independent contract. In situations where two deeds of trust are being recorded concurrently, the lien priority is typically handled by instructing the title company as to which security instrument will be recorded first.
A subordination real estate mortgage clause gives the loan it's in reference to first lien position. It states that any other loans or liens on the property take a second lien position. Most first mortgage lenders won't fund a loan unless there is a subordination clause giving them first lien position.
Many people have a subordinate mortgage in the form of a home equity line of credit or home equity loan. A subordinate mortgage is secured by your property but sits in second position, if you have a primary mortgage, for getting paid in the event you default.
Lenders can execute what are referred to as executory subordination agreements. Executory subordination agreements are essentially a promise to enter into a subordination agreement in the future if another loan enters the picture, like a construction loan.
Getting A Second Mortgage A second mortgage will become a subordinate loan. If you repay the primary loan within the term of the second mortgage, the second mortgage can take its place as the primary loan.
A subordination agreement must be signed and acknowledged by a notary and recorded in the official records of the county to be enforceable.
Again, if you're refinancing your first mortgage and the property also has a subordinate mortgage, the refinancing lender will usually handle the process of getting the necessary subordination agreement. But you need to ensure that the required subordination agreement is completed before the new loan's closing date.