A subordination agreement is a legal document that establishes one debt as ranking behind another in priority for collecting repayment from a debtor.
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.
Summary:
1. A subordination agreement refers to a legal agreement that prioritizes one debt over another for securing repayments from a borrower.
2. The subordinated debts sometimes get little or no repayments when the borrowers do not hold sufficient funds to repay the debts.
3. Subordination agreements are usually carried out when property owners refinance their first mortgage.
Form of Subordination Agreement
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