Subordination clauses are typically used when a home loan is refinanced and there are existing liens on a property. So let me go into a little bit of depth about different types of clauses. Subordination is the act of yielding priority. The subordination clause, also known as the subordinate clause in real estate, finance, and banking refers to the order of priorities in claims for ownership or assets. The fee goes towards compensating the lender for interest and other charges that  would otherwise be lost due to early payment. Dawni Do Right. Flash Sale: Save 35% right now Apply promo code. Real estate contracts use many types of clauses that you could see on your real estate exam. Real Estate Glossary Term Subordination Clause. First In Line. ... For example, most adverbial clauses usually follow the main clause, although they can also come before the main clause. In real estate, subordination refers to the order of liens on a property. This trustee holds the legal title to the property as security for a loan between a lender and a borrower. Previous Next > More Real Estate Definitions. Prepayment Penalty Clause. The subordination clause apportions the priority of rights between tenants and lenders. If the loan contains a release clause, a designated parcel or property is freed from any claims by the creditor once a proportional amount of the loan has been paid off, giving the borrower full rights to that property. Usually, liens have chronological priority- the first lien to be recorded is first to get paid, etc. In a lease subordination clause, the tenant is agreeing to allow his/her interest to be subordinated to the lender's. In a lease subordination clause, the tenant is agreeing to allow his/her interest to be subordinated to the lender's. A sample subordination agreement is commonly requested of new tenants. Prepayment penalties exist to protect lenders against the loss of interest income that would have been paid on the loan over time. Without a subordination clause, loans take chronological priority. By creating a lease subordination agreement, mortgage companies are protecting their interests in the rental property, making sure their claims are paid first, ahead of any tenant's claim. The subordination nondisturbance and attornment form a tenant signs is a way for a lender to assure continued rent payments in the event of a foreclosure and change in ownership. […] Read more. What is a Subordination Agreement in Real Estate? They are often used in a rising interest rate environment. A subordinate deed of trust occurs in a situation where a person has two deeds on a single property. USLegal has been awarded the TopTenREVIEWS Gold Award 9 years in a row as the most comprehensive and helpful online legal forms services on the market today. If so, that means you have two mortgages on your property. Usually, liens have chronological priority- the first lien to be recorded is first to get paid, etc. The Subordination Clause. 0 0 Related Articles Real Estate Website Brownstone Zoning Zone Writ of Execution Wrap Around Mortgage This means the oldest loan becomes the primary loan, with first call on the proceeds of a foreclosure sale. The next clause I want to discuss is the Due-On-Sale clause. USLegal received the following as compared to 9 other form sites. Wiki Real Estate Subordination Clause Subordination Clause – A clause in a mortgage or lease stating that the rights of the holder shall be secondary or subordinate to a subsequent encumbrance. Unfortunately, not all lien-holders may agree to the subordination clause. Has two deeds on a percentage of the loan and the lender interest... This means that if the owner of the tenant with first call on the loan and the lender.! 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