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A subordination clause serves to protect the lender in case you default. If a default happens, the lender would have the legal standing to repossess the home and cover their loans outstanding balance first. If there are other subordinate mortgages involved, the secondary liens will take the backseat in this process.
A subordinate clause cannot stand alone. It is not independent.Example sentences using a subordinate clause If you win the award, I will buy you a new video game. Since the sun will shine today, we will go to the beach. When she was sick, her teacher gave the exam. Because mom said so, I apologized to Cecilia.
The most common application of subordination clauses is when refinancing a property. Refinancing occurs when the original loan is paid in full, and a new loan provider structures the agreement under a new interest rate.
Subordination is the process of ranking home loans (mortgage, HELOC or home equity loan) by order of importance. When you have a home equity line of credit, for example, you actually have two loans your mortgage and HELOC. Both are secured by the collateral in your home at the same time.
The most common application of subordination clauses is when refinancing a property. Refinancing occurs when the original loan is paid in full, and a new loan provider structures the agreement under a new interest rate.
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How to Use Subordination. Example: Because she got home late, she missed her dinner. Pattern: Because dependent clause, independent clause. Using coordination would show a weaker relationship: She got home late, and she missed her dinner.
Understanding Subordinated Debt Subordinated debt is any type of loan thats paid after all other corporate debts and loans are repaid, in the case of borrower default. Borrowers of subordinated debt are usually larger corporations or other business entities.
When you take out a mortgage loan, the lender will likely include a subordination clause. Within this clause, the lender essentially states that their lien will take precedence over any other liens placed on the house. A subordination clause serves to protect the lender in case you default.
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.
Lien subordination refers to the order in which claims on collateral are prioritized. This takes place most often among senior secured lenders and does not imply that one tranche of senior debt has payment preference over another.

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