A subordination agreement is a legal document that clarifies the priority of one debt over another in terms of collateral. In essence, it allows a lender to acquire a lien position on a property that is lower in priority than another lender’s lien position. This is an important document for those involved in commercial real estate transactions or refinancing their mortgage.
A subordination agreement deed is a specific type of subordination agreement that pertains to real estate. It is used when a borrower wants to secure a new mortgage or loan on their property, but there is already an existing mortgage or lien on it. The subordination agreement deed ensures that the new mortgage or loan is secondary to the existing one.
When a property has multiple liens or mortgages, the lenders must agree on the priority of each lien. This agreement is known as the lien priority. The priority of the lien determines which lender gets first access to the proceeds of the sale if the property is sold. The subordination agreement deed outlines the terms of this agreement.
The subordination agreement deed is a legal document that must be signed by all parties involved, including the borrower, the new lender, and the existing lender. It also needs to be notarized to make it enforceable in court.
One reason a borrower might seek a subordination agreement deed is to refinance their mortgage. If a borrower has an existing mortgage on their property and wants to refinance, the new lender may require a subordination agreement deed to ensure that their lien is secondary to the existing mortgage.
Another reason a subordination agreement deed might be necessary is if the borrower wants to use their property as collateral for a loan. If there is already a lien on the property, the new lender may require a subordination agreement deed to clarify the priority of each lien.
Overall, a subordination agreement deed is an essential document for those involved in commercial real estate transactions or refinancing their mortgage. It ensures that all parties agree on the priority of each lien and protects their interests in case the property is sold. It`s important to consult with a real estate attorney or a title company to ensure that all legal requirements are met and the document is properly executed.