"Subordination Agreement Template"

What Is a Subordination Agreement?

A Subordination Agreement is a formal document signed by a lender and a debtor by means of which the parties confirm the existing debt owed by the borrower has a preference before other debts of the borrower. Often, it is necessary to establish the priority of debts, especially if the debtor regularly fails to make payments, faces insolvency, or the creditor requires immediate payments in accordance with the original contract with the breaching party.

Alternate Names:

  • Loan Subordination Agreement;
  • Debt Subordination Agreement.

You can download a printable Subordination Agreement template through the link below or make your own agreement via our online form builder. Using this agreement, you will be able to acknowledge that the claim of a particular creditor is superior to other claims and requests and make the lender whose details are indicated in the contract the primary lender.

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How to Write a Subordination Agreement?

Follow these steps to prepare a Subordination Agreement:

  1. Title the document properly. You may draft a Loan Subordination Agreement if you are taking out a second mortgage for your residence and the lender wants to make sure you understand your responsibility before them. Alternatively, name your contract a Debt Subordination Agreement if you owe money to a credit company to show the lender they will be compensated first.
  2. Identify the parties to the contract - the lender and the borrower. You may refer to them by their full names, addresses, and other personal details if necessary. Here is where you may enter the contact information as well.
  3. Describe the debt or loan in question. It is highly recommended to refer to the original agreement signed by the parties, especially if the parties negotiated the possibility to handle the debt using subordination. Note that you should keep these documents together to avoid confusion.
  4. Confirm that the debt described above will be considered prior and superior to all other financial liabilities of the debtor - it becomes the senior debt. This way, other debts of the borrower become junior debts and there is a possibility they will not be repaid in full or there will no be satisfaction for the lender at all, which happens often if the debtor becomes bankrupt after the primary lender's interests are addressed. Here is how it works: if you have $500,000 in assets, while your senior debt is $400,000 and junior debt is $200,000, the primary debtholder will receive the entire amount of debt and other lenders will get the rest of the money - $100,000 in this case - distributed among them.
  5. Discuss the possible termination of the agreement. It is very likely that the insolvency proceedings lead nowhere or the debtor acquires enough funds to deal with all their debts without supplemental arrangements. Also, the lender may not receive the promised money on time, which gives them the right to cancel the existing contract and seek compensation via other legal methods.
  6. Sign and date the document. Since your arrangement may involve large sums of money, it is a good idea to complete the deal in the presence of witnesses or a notary public.

Take a look at these related templates:

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Download "Subordination Agreement Template"

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Subordination Agreement
This Subordination Agreement (hereinafter referred to as the “Agreement”) is entered
into as of ________________, by and between _____________________, with a mailing
address of _______________________________________________________________
_________ (hereinafter referred to as the “Subordinator”) and _____________________,
with a mailing address of ___________________________________________________
____________________________________ (hereinafter referred to as the “Franchisee”),
collectively referred to as the “Lender,” both of whom agree to be bound by this
Agreement.
1. The Borrower. _____________________, with a mailing address of ______________
_____________________________________ (hereinafter referred to as the “Borrower”)
has applied to the Lender for a loan to be made to the Borrower and to be evidenced by a
promissory note secured by a mortgage covering certain real property.
The real property offered by the Borrower as security to the Lender is currently subject to
the prior lien described below. The Lender will make such loan to the Borrower only on
the condition precedent that such prior lien be subordinated to the the Lender’s mortgage
described below.
In consideration of the matters described above, and of the mutual benefits and
obligations set forth in this agreement, the parties agree as follows:
2. Subordination of Deed Restriction. The lien to be subordinated covers real property
described as _____________________________________________________________
and made on ________________ between the Borrower and the Subordinator, and filed
or recorded on ________________, in ________________ of the records of the County
of ________________, State of ________________, shall be and the same is now
subordinated and made subject and subsequent to the lien of that certain mortgage
covering the real property referenced above, between the Borrower and the Lender.
3. Legal and Binding Agreement. ​ T his Agreement is legal and binding between the
Parties as stated above. The Parties each represent that they have the authority to enter
into this Agreement.
The undersigned Subordinator has executed this agreement at _____________________
____________________________________________ on the date first appearing above.
© ​
T EMPLATEROLLER.COM
Subordination Agreement
This Subordination Agreement (hereinafter referred to as the “Agreement”) is entered
into as of ________________, by and between _____________________, with a mailing
address of _______________________________________________________________
_________ (hereinafter referred to as the “Subordinator”) and _____________________,
with a mailing address of ___________________________________________________
____________________________________ (hereinafter referred to as the “Franchisee”),
collectively referred to as the “Lender,” both of whom agree to be bound by this
Agreement.
1. The Borrower. _____________________, with a mailing address of ______________
_____________________________________ (hereinafter referred to as the “Borrower”)
has applied to the Lender for a loan to be made to the Borrower and to be evidenced by a
promissory note secured by a mortgage covering certain real property.
The real property offered by the Borrower as security to the Lender is currently subject to
the prior lien described below. The Lender will make such loan to the Borrower only on
the condition precedent that such prior lien be subordinated to the the Lender’s mortgage
described below.
In consideration of the matters described above, and of the mutual benefits and
obligations set forth in this agreement, the parties agree as follows:
2. Subordination of Deed Restriction. The lien to be subordinated covers real property
described as _____________________________________________________________
and made on ________________ between the Borrower and the Subordinator, and filed
or recorded on ________________, in ________________ of the records of the County
of ________________, State of ________________, shall be and the same is now
subordinated and made subject and subsequent to the lien of that certain mortgage
covering the real property referenced above, between the Borrower and the Lender.
3. Legal and Binding Agreement. ​ T his Agreement is legal and binding between the
Parties as stated above. The Parties each represent that they have the authority to enter
into this Agreement.
The undersigned Subordinator has executed this agreement at _____________________
____________________________________________ on the date first appearing above.
© ​
T EMPLATEROLLER.COM
The Parties agree to the terms and conditions set forth above as demonstrated by their
signatures as follows:
____________________
____________________
____________________
Subordinator’s Printed Name
Franchisee’s Printed Name
Borrower’s Printed Name
____________________
____________________
____________________
Subordinator’s Signature
Franchisee’s Signature
Borrower’s Signature
____________________
____________________
____________________
Date
Date
Date
© ​
T EMPLATEROLLER.COM
Notary Acknowledgment
State of _____________________
County of ___________________
The foregoing was acknowledged before me this ____ day of _________________, by
the undersigned, _________________, who is personally known to me or satisfactorily
proven to me to be the person whose name is subscribed to the within instrument.
_________________________________
Printed Name of Notary Public
_________________________________
Signature of Notary Public
My commission expires: ___________________
(seal)
© ​
T EMPLATEROLLER.COM
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