As a professional, I know the importance of creating content that not only informs but also helps readers find the information they need. That`s why, in this article, we will discuss when to record a subordination agreement.
A subordination agreement is a legal document that outlines the priority of liens on a property. This agreement is often used in situations where there is more than one lien on a property. By signing a subordination agreement, a lienholder agrees to give up their position in the hierarchy of liens and accept a lower priority.
So when should you record a subordination agreement?
There are a few situations where it may be necessary to record a subordination agreement:
1. Refinancing a mortgage
If you are refinancing your mortgage, your new lender will want to ensure that their lien is in first position. This means that any other liens on the property must be subordinated. The subordination agreement should be recorded before the new mortgage is recorded.
2. Second mortgage or home equity loan
If you are taking out a second mortgage or a home equity loan, the lender may require a subordination agreement from your first mortgage lender. This ensures that the second mortgage or home equity loan is in the proper position in the hierarchy of liens. The subordination agreement should be recorded before the second mortgage or home equity loan is recorded.
3. Selling a property
If you are selling a property that has liens on it, you may need to obtain subordination agreements from the lienholders. This ensures that the new owner takes title to the property subject to the liens. The subordination agreements should be recorded before the sale is completed.
4. Bankruptcy
If you are filing for bankruptcy, a subordination agreement may be necessary if you have liens on your property. This ensures that the bankruptcy trustee can sell the property with clear title. The subordination agreement should be recorded before the bankruptcy case is closed.
In any of these situations, it is important to have the subordination agreement recorded to protect the interests of all parties involved. Recording the agreement ensures that it is publicly available and searchable in county records.
In conclusion, a subordination agreement is an important legal document that outlines the priority of liens on a property. It is typically recorded in situations where there is more than one lien on a property. By understanding when to record a subordination agreement, you can ensure that all parties involved are protected.