Definition of "Subordinate"

John Paulsen real estate agent
John Paulsen, Real Estate Agent Crye-Leike Coastal 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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Comments for Subordinate


Fritz Fritz said:

Is subordinate the proper term when u will allow someone to build on a lot and pay u at a later date or is subrogate the correct term?

Oct 28, 2020  13:41:29

 
Real Estate Agent

Hey, Fritz! The term “subordinate” is used to define a priority amongst liens on your property. If you don’t know that there is any lien on your home, the mortgage on your property is usually the primary lien. In case you run out of finance, and you can’t afford to pay the mortgage and any other loans, the lien with the first position on your title gets paid off first. Subrogate is a term used to describe a situation in which one party retains the right to pursue another party’s claim. The case describe by you doesn’t seem to fit any of the terms, but I’ll leave that up to you to decide based on the information provided.

Nov 03, 2020  13:19:31
 
 

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