This agreement allows one lien holder to subordinate its deed of trust to the lien of another lien holder. For valuable consideration, a particular deed of trust will at all times be prior and superior to the subordinate lien.
A Maryland subordination agreement of deed of trust is a legally binding document that outlines the priority of multiple liens and mortgages on a property. In simple terms, it determines the order in which creditors would receive payment during a foreclosure or sale of the property. In the context of real estate transactions, a subordination agreement is typically used when a property owner wishes to obtain a new loan or refinance an existing mortgage while already having an outstanding mortgage or lien on the property. This agreement rearranges the order of these obligations, ensuring that the newly obtained loan becomes the primary lien while the existing mortgage or lien takes a secondary position. The purpose of a subordination agreement is to protect the interests of the lenders or creditors to the property. By entering into this agreement, those with secondary liens acknowledge that in the event of foreclosure, the proceeds from the sale would first be used to repay the primary lien holder before satisfying any remaining obligations. In Maryland, there are a few different types of subordination agreements, each with its own unique purpose: 1. First Lien Subordination Agreement: This type of agreement is used when a property owner wishes to refinance their existing first lien mortgage. By entering into this agreement, the existing mortgage becomes subordinate to the new loan, allowing the refinancing to proceed. 2. Second Lien Subordination Agreement: This agreement is utilized when a property owner wants to obtain a second mortgage or lien on the property. By signing this agreement, the existing first lien holder's priority is maintained, and the new loan becomes a subordinate lien. 3. Intercreditor Subordination Agreement: This agreement is commonly used in commercial real estate transactions where multiple lenders are involved. It establishes the priority of each lender's claim, ensuring fair distribution of proceeds in the event of default or foreclosure. 4. Cross-Collateralization Subordination Agreement: This type of agreement allows a lender to secure multiple properties or assets with a single mortgage or deed of trust. It rearranges the order of obligations on all the properties involved, dictating the priority of each lien. It is crucial for all parties, including lenders, borrowers, and lien holders, to understand and agree to the terms of the Maryland subordination agreement of deed of trust before proceeding with any transactions. Seeking legal advice is often recommended ensuring compliance with Maryland's specific laws and regulations regarding subordination agreements.
