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Why Do Subordination Agreement?

Alexander Ross • • 7 min read
Why Do Subordination Agreement?

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 the purpose of subordination agreements?

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.

What is the meaning of subordination agreement?

Subordination agreement is a contract which guarantees senior debt will be paid before other “subordinated” debt if the debtor becomes bankrupt. ... The creditor usually will require the debtor to sign a subordination agreement which ensures they get paid before other creditors, ensuring they are not taking on high risks.

Alexander Ross
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Alexander Ross

Alexander Ross has covered the video game industry for a decade, writing deep dives on game design, esports tournaments, VR developments, and gaming culture.