A Delaware Subordination Agreement is a legal document used in real estate transactions to outline the priority of mortgages on a property. It is relevant when a borrower wishes to refinance or take out a new loan while still having an existing mortgage on the same property. By utilizing a subordination agreement, the new mortgage lender can establish priority over the existing mortgage, ensuring that their loan will hold a superior position in case of foreclosure or default. The Delaware Subordination Agreement serves as an agreement between the existing mortgage lender, the new mortgage lender, and the borrower. It lays out the terms and conditions under which the existing mortgage will be subordinated, or relegated to a lower priority lien position compared to the new mortgage. This allows the new lender to have a first lien position, protecting their interest in the property. There are several types of Delaware Subordination Agreements that may be used, depending on the specific circumstances of the transaction: 1. General Subordination Agreement: This is the most common type of subordination agreement used in Delaware. It is employed when a borrower wants to refinance their existing mortgage with a new lender. The existing lender agrees to subordinate their lien position to the new lender, allowing the new lender to have first priority on the property. 2. Partial Subordination Agreement: In certain cases, a borrower may need to retain a portion of their existing mortgage while securing a new loan. This type of agreement ensures that the new lender's mortgage will take precedence over the portion of the existing mortgage subject to subordination. It allows borrowers to tap into the equity of their property while obtaining the necessary funds from a second lender. 3. Standby Subordination Agreement: This agreement is often used in commercial real estate transactions. It allows for the subordination of an existing mortgage to a new loan, but only if certain events or conditions occur. For example, the existing lender may agree to subordinate their lien position if the borrower's occupancy rate reaches a certain threshold or if specific revenue targets are met. 4. Intercreditor Subordination Agreement: In cases where multiple lenders are involved, such as in syndicated loans or when a property has multiple mortgages, an intercreditor subordination agreement may be utilized. This agreement outlines the priority and rights of each lender, ensuring clarity and order in the event of default or foreclosure. The Delaware Subordination Agreement is a crucial legal document that protects the interests of both the new mortgage lender and the borrower. It clearly defines the relationship between existing and new lenders and ensures the proper order of lien priority. This agreement plays a vital role in facilitating real estate transactions and providing security for all parties involved.