A North Carolina Subordination Agreement is a legal document that outlines the agreement between lenders when a homeowner refinances their mortgage or takes out a second mortgage, thus affecting the priority of existing mortgage loans. This agreement ensures that the new mortgage takes priority over the previous one, allowing lenders to reassess the terms and conditions of the loan. In North Carolina, there are various types of subordination agreements used to subordinate an existing mortgage to a new mortgage, such as: 1. First Mortgage Subordination Agreement: This type of agreement occurs when a homeowner wants to refinance their existing mortgage with a new first mortgage. It allows the new lender to become the primary lien holder, while the previous mortgage moves to a secondary position. 2. Second Mortgage Subordination Agreement: When a homeowner decides to take out a second mortgage, this agreement comes into play. It involves subordinating the existing first mortgage to the new second mortgage, creating a hierarchy in payment priority. 3. Home Equity Line of Credit (HELOT) Subordination Agreement: If a homeowner wishes to obtain a HELOT, they will need to subordinate their current mortgage to the new line of credit. This agreement allows the HELOT lender to have first priority in repayment, while the first mortgage remains subordinated. 4. Construction Loan Subordination Agreement: When financing home construction, homeowners may need a construction loan that takes priority over the original mortgage. This agreement ensures that the new lender has the primary lien on the property during the construction phase. Subordination agreements in North Carolina involve negotiations between lenders, borrowers, and any other relevant parties to determine the terms of the agreement. These terms often include the specific amount or percentage of subordination, interest rates, repayment schedules, and other rights and obligations of the involved parties. It is crucial to consult with an attorney or a qualified professional to draft and review the North Carolina Subordination Agreement carefully. This will ensure compliance with state laws and protect the interests of all parties involved. By having a comprehensive and properly executed agreement, the borrower can obtain the desired loan while maintaining harmony with existing lenders.
North Carolina Subordination Agreement Subordinating Existing Mortgage to New Mortgage
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FAQ
Who Benefits from a Subordination Clause? A subordination clause is meant to protect the interests of the primary lender. A primary mortgage usually covers the cost of purchasing the home; however, if there is a secondary mortgage, the clause ensures that the primary lender retains the number one priority.
Getting A Second Mortgage A second mortgage will become a subordinate loan. If you repay the primary loan within the term of the second mortgage, the second mortgage can take its place as the primary loan.
A mortgage subordination refers to the order the outstanding liens on your property get repaid if you stop making your mortgage payments. For example, your first home loan (primary mortgage) is repaid first, with any remaining funds paying off additional liens, including second mortgages, HELOCs and home equity loans.
A subordination clause is a clause in an agreement that states that the current claim on any debts will take priority over any other claims formed in other agreements made in the future. Subordination is the act of yielding priority.
Again, if you're refinancing your first mortgage and the property also has a subordinate mortgage, the refinancing lender will usually handle the process of getting the necessary subordination agreement. But you need to ensure that the required subordination agreement is completed before the new loan's closing date.
Many people have a subordinate mortgage in the form of a home equity line of credit or home equity loan. A subordinate mortgage is secured by your property but sits in second position, if you have a primary mortgage, for getting paid in the event you default.
A subordination real estate mortgage clause gives the loan it's in reference to first lien position. It states that any other loans or liens on the property take a second lien position. Most first mortgage lenders won't fund a loan unless there is a subordination clause giving them first lien position.
Many people have a subordinate mortgage in the form of a home equity line of credit or home equity loan. A subordinate mortgage is secured by your property but sits in second position, if you have a primary mortgage, for getting paid in the event you default.