www.businessdictionary.com/definition/subordination-agreement.html A sub-payment agreement stipulates that the lender of the priority debt has the legal title to be repaid in full before the lender of the second breach. The priority lender also has a higher right to the property or asset. This type of agreement is most often used when a debtor is late or does not have enough money to repay the debts of the first lender. What drove you to look for subordination agreements? Please let us know where you read or heard it (including the quote, if possible). en.wikipedia.org/wiki/Subordination_agreement individuals and businesses turn to credit institutions when they have to borrow funds. The lender is compensated if he receives interest on the amount borrowed, unless the borrower is in arrears in his payments. The lender could require a subordination agreement to protect its interests if the borrower takes out additional pledge rights over the property, for example. B if he borrowed a second mortgage. Subordination agreements are widely used in the mortgage sector, because in the mortgage sector, a person can take out several loans (mortgages) with the same asset. In the case of subordination agreements, the first mortgage is the top priority over all other mortgages. However, a borrower may disrupt the order or priority by refining the initial loan, i.e.
paying the first loan and obtaining a Lew loan. Since the second lender always remains the subordinated debt lender, a lender of the first mortgage that will be refinanced will seek a subsecation agreement to maintain its leading position in debt repayment. The contract of subsequentity must be signed by the second mortgage lender and confirmed by a notary. « Subordination agreement. » Merriam-Webster.com Legal Dictionary, Merriam Webster, www.merriam-webster.com/legal/subordination%20agreement. Retrieved November 30, 2020. A subordination agreement recognizes that one party`s claim or interest is greater than that of another party if the borrower`s assets must be liquidated to repay the debt. Subordination agreements are the most common in the mortgage industry. If a person borrows a second mortgage, that second mortgage has less priority than the first mortgage, but these priorities can be disrupted by refinancing the original loan. Subordination is an agreement, debt or debt that is a priority to place in a lower position behind another debt, especially a new loan.
A homeowner with a loan secured by the property who is applying for a second mortgage to make top-ups or repairs should normally get a subordination of the original loan, so the new loan is the first priority. . . .