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.
Subordination Agreement of Deed of Trust
State:
Multi-State
Control #:
US-00185
Format:
Word;
Rich Text
Instant download
Description
Definition and meaning
A Subordination Agreement of Deed of Trust is a legal document that establishes the priority of liens on a property. In other words, it allows the holder of a lower priority lien to agree that their lien will be subordinate to a new or existing lien. This agreement is often necessary when a borrower needs to refinance or obtain additional financing. By subordinating their lien, the existing lender may facilitate this process, allowing the borrower to secure new financing.
Who should use this form
This form is commonly used by borrowers who wish to refinance or obtain additional loans secured by their property. It is also utilized by lenders holding an existing lien who need to adjust their lien position to allow another lender to obtain a primary lien. Additionally, real estate investors and businesses looking to manage their financing effectively may find this form beneficial. It is essential for all parties involved in the lending process to understand their rights and obligations under such agreements.
Key components of the form
The Subordination Agreement typically includes several critical components:
- Parties Involved: Identification of the borrower, existing lien holder, and new lien holder.
- Description of Property: Detailed description of the property that is being encumbered by the liens.
- Statements of Subordination: Clear wording that indicates the current lien holder agrees to subordinating their interest in favor of the new lender.
- Execution and Notarization: Signatures of the parties involved along with a notary's acknowledgment to validate the agreement.
Legal use and context
A Subordination Agreement of Deed of Trust is primarily used in real estate transactions when a borrower seeks to refinance or extend their mortgage. This document is crucial in establishing the hierarchy of claims on the property, which can affect foreclosure processes and the dispensation of proceeds from a sale. Understanding the legal implications of subordinate and senior liens is essential, as it impacts the risk and rewards for lenders and borrowers alike.
Benefits of using this form online
Using a Subordination Agreement of Deed of Trust online offers several advantages:
- Accessibility: Users can easily fill out and download the form from anywhere with internet access.
- Time-saving: Online forms are typically quicker to complete compared to traditional methods.
- Guidance: Online platforms often provide step-by-step instructions and legal advice, reducing errors and confusion.
- Improved Record-Keeping: Digital copies can be stored easily for future reference, ensuring that all parties have access to the agreement.
What to expect during notarization or witnessing
During the notarization process for the Subordination Agreement, the parties involved will meet with a notary public to sign the document officially. Both the borrower and the existing lien holder must present valid identification. The notary will verify the identities and ensure that all parties understand the agreement's contents before signing. This process adds an extra layer of legal protection and ensures the document's validity. It’s important to schedule this step after ensuring that all terms of the agreement are agreed upon and finalized.
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FAQ
A subordination clause or subordination agreement is used to lower the priority of a first recorded deed of trust or mortgage in favor of a later or junior recorded deed of trust or mortgage.
A Subordination Deed includes provisions where the junior creditor agrees not to be paid by the debtor until the senior creditor has been repaid in full.
The borrower (trustor) benefits the most from a subordination clause since this makes it easier to obtain an additional loan on their property. For example, the buyer of vacant land can obtain a construction loan more easily if the loan against the land will be subordinated to the construction loan.
A subordination agreement prioritizes collateralized debts, ranking one behind another for purposes of collecting repayment from a debtor in the event of foreclosure or bankruptcy. A second-in-line creditor collects only when and if the priority creditor has been fully paid.
A subordination clause or subordination agreement is used to lower the priority of a first recorded deed of trust or mortgage in favor of a later or junior recorded deed of trust or mortgage.
A subordination agreement is a legal document that establishes one debt as ranking behind another in priority for collecting repayment from a debtor. The priority of debts can become extremely important when a debtor defaults on payments or declares bankruptcy.
Despite its technical-sounding name, the subordination agreement has one simple purpose. It assigns your new mortgage to first lien position, making it possible to refinance with a home equity loan or line of credit.