Maricopa, Arizona Subordination Agreement: Subordinating Existing Mortgage to New Mortgage A Maricopa, Arizona Subordination Agreement is a legal document that enables homeowners to refinance or acquire a new mortgage while maintaining the priority of their existing mortgage. This agreement is crucial when borrowers intend to secure a new loan while still owing money on their current mortgage. By subordinating the existing mortgage to the new mortgage, homeowners ensure that the new mortgage takes precedence if any foreclosure or default proceedings occur. The subordination agreement protects the interests of the new lender and helps borrowers secure better financing terms. There are different types of Maricopa, Arizona Subordination Agreement Subordinating Existing Mortgage to New Mortgage, including: 1. Residential Subordination Agreement: This type of subordination agreement pertains to residential properties in Maricopa, Arizona. Homeowners can use this agreement when refinancing their property or acquiring a new mortgage while already having an existing mortgage. 2. Commercial Subordination Agreement: For commercial property owners in Maricopa, Arizona, this subordination agreement applies. It allows businesses to obtain a new mortgage while ensuring their existing mortgage is subordinate to the new loan, protecting the lender's position. 3. Construction Subordination Agreement: In situations where homeowners or commercial property owners need additional financing for new construction or renovations, this subordination agreement becomes relevant. It prioritizes the new mortgage obtained for construction purposes while subordinating the existing mortgage. 4. Second Lien Subordination Agreement: Sometimes, property owners may want to secure a second lien mortgage while still having an existing first mortgage. This subordination agreement ensures that the new, second mortgage maintains priority over the first mortgage in case of foreclosure or default. Regardless of the specific type of Maricopa, Arizona Subordination Agreement Subordinating Existing Mortgage to New Mortgage, the purpose remains the same — to protect the lender's interests and allow borrowers to secure better financial terms while still maintaining their existing mortgage.
Maricopa Arizona Subordination Agreement Subordinating Existing Mortgage to New Mortgage
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The most common type of subordinate lien is a second mortgage. When you get a second mortgage loan, the lender records the lien, representing its claim on the collateral: your real estate. Because your first mortgage provider has the first claim on the property, the second mortgage is considered a subordinate lien.
A second mortgage will become a subordinate loan. If you repay the primary loan within the term of the second mortgage, then the second mortgage can take its place as the primary loan.
The existing second loan moves up to become the first loan. The lender of the first mortgage refinancing will now require that a subordination agreement be signed by the second mortgage lender to reposition it in top priority for debt repayment.
When you take out a mortgage loan, the lender will likely include a subordination clause. Within this clause, the lender essentially states that their lien will take precedence over any other liens placed on the house. A subordination clause serves to protect the lender in case you default.
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. Signing your agreement is a positive step forward in your refinancing journey.
Purpose of a Subordination Agreement A subordination agreement is generally used when there are two mortgages and the mortgagor needs to refinance the first mortgage. It acknowledges that one party's interest or claim is superior to another in case the borrower's assets need to be liquidated to repay debts.
What is a Subordinate Mortgage? Subordinate mortgages are loans that have a lower priority status than any other recorded liens (or debts) against a property. When you get the loan you need to purchase your home, this loan is typically recorded as the first repayment priority on your deed after closing.
A second mortgage will become a subordinate loan. If you repay the primary loan within the term of the second mortgage, then the second mortgage can take its place as the primary loan. As a second mortgage, the lender will be taking on more risk.