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Subordination of Mortgage

Definition of 'Subordination of Mortgage'

A Subordination of Mortgage is a document signed when there are two mortgages on a property and one (the first one) is subordinated to the other (the second one).

What does Subordination of Lease mean:

Mortgage subordination is common when a property owner wants to refinance the first mortgage. The company financing the first mortgage may ask the property owner to have the other lender sign a Subordination of Mortgage which would state which lending company will take precedence in receiving its money back in case the borrower defaults on the mortgage.

From the borrower's perspective, one of the main things to be clarified when considering second mortgage subordination is the property's equity in order to ensure that the value of the property can accommodate the increased borrowing.

Example:

Here's a real-life example from one of the properties researched on PropertyShark:

References:
http://www.ehow.com/how_4616670_subordinate-second-mortgage.html
http://www.mortgage101.com/article/what-is-mortgage-subordination-agreement

Disclaimer:
The glossary is intended to provide real estate professionals and home buyers with a basic understanding of various specialized terms related to legal rights over a property. All terms appear in public records such as ACRIS. We do not take responsibility for the legal accuracy of the definitions provided and ask that use of these explanations in a legal setting be made only after checking with a lawyer or another specialist in the field.