Subordination

To put in an inferior class or order; to make subject to, or subservient. A legal status that refers to the establishment of priority between various existing liens or encumbrances on the same parcel of property.

A subordination agreement is a contract whereby a creditor agrees that the claims of specified senior creditors must be paid in full before any payment on a subordinate debt can be paid to the subordinate creditor.

A subordination clause in a mortgage is a provision that gives a subsequent mortgage priority over one that has been executed at an earlier date.

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subordination n. allowing a debt or claim which has priority to take second position behind another debt, particularly a new loan. A property owner with a loan secured by the property who applies for another loan to make additions or repairs usually must get a subordination of the original loan so the new obligation is in first place. A declaration of homestead must always be subordinated to a loan. (See: subordination agreement)