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Definition of "Subordinate"

Elizabeth Sachero-Perez
  Berkshire Hathaway Home Services Penfer Realty

To reduce the priority of payment of a debt or lien. For example, in order to enable a tract of land to be developed, the first mortgagee agrees to subordinate his or her loan to a new development mortgage loan that will now become the first mortgage. Although both debts are now secured by the same property, in the event of default and subsequent liquidation of the property to pay-off the liabilities, the second mortgage will not be paid until the first mortgage is fully satisfied.

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