What is a subordination agreement?

A subordination agreement is a legal document used in property law in Massachusetts and other U.S. states. It is used when two parties have a mortgage on the same property and one of the parties wants to take out a second mortgage. The subordination agreement acknowledges the existing lien on the property and allows for a second, subordinate lien to be taken out. In the agreement, the lien holder agrees to “subordinate” their claim on the property to the second lien holder, meaning they will relinquish their priority on the property. This lets the second mortgage borrower take out a second loan without having to pay off the first loan. The subordination agreement is a legally binding document that ensures that both parties’ rights are protected in the event of a foreclosure. It also ensures that the second mortgage borrower pays off the first mortgage before receiving the proceeds of the sale of the property. Subordination agreements can be complex and should be reviewed by an experienced attorney before entering into any agreement.

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What is a subordination agreement?

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