What is a subordination agreement?

A subordination agreement is a legal document that is used when the owner of a property agrees to give priority to one or more existing liens on their property over any new lien that is placed on the property. This means that any new debt that is taken on for the property, such as a loan, would take second place to any of the existing liens on the property, such as mortgages or tax liens. This is beneficial for the lender of the new loan because it gives them assurance that their loan will get paid even if the owner of the property defaults on the loan. In California, a subordination agreement must be in writing and must be filed with the county recorder’s office in the county where the property is located. It must also include information such as the property address, the name of the current mortgagee and the name of the new creditor. This document is then used to subordinate the existing mortgage to the new loan. Subordination agreements can be beneficial for both the lender and the borrower, since it gives them both peace of mind that their loans will be paid off in the unfortunate event of a default on the loan. It is important to understand the terms and conditions of a subordination agreement before signing and filing it.

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