Subordination

To make one claim (or lien) inferior to that of another claim (or lien). Remember that liens are recorded and normally honored in chronological order. However, if a borrower refinances only the primary mortgage but not the junior mortgage on a property, the junior mortgage must be subordinated to the new refinance loan. The second mortgage lien lender must sign a subordination agreement prior to the closing, allowing the new first mortgage loan to accept primary lien. For more information, see the "Mortgage Deeds and Promissory Notes" article in the "Real Estate In-Depth" section.

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Real Estate 101

Real Estate 101

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