Subordination Clause
A subordination clause is a key provision in mortgage contracts that establishes the order of repayment if a property is sold to satisfy debts. It determines which lender or lienholder has priority in being paid back.
Why it matters for brokers:
It affects the risk level for lenders and can impact loan approval.
Buyers with multiple loans should understand how subordination impacts refinancing or resale.
Sellers need to know how existing liens may influence closing.
Broker takeaway: Knowing how subordination works helps you anticipate financing issues and guide clients toward smoother transactions.
Summary
In a mortgage contract there is a subordination clause which details how if the property is sold to satisfy debts, who gets paid back first.