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A subordination agreement is a legal document that alters the order of priority of claims against a property, specifically regarding mortgages or liens. In real estate, when multiple loans or liens exist on a property, lenders generally have priority to claim the property in the event of borrower default based on the order in which the loans were recorded. A subordination agreement allows a lender who holds a secondary mortgage or lien to agree that the claims of another lender (holding a primary mortgage or lien) are superior in priority.

This change is particularly important in situations where a borrower wishes to refinance a primary mortgage or take on a new loan. By subordinating an existing loan, the secondary lender can enable the borrower to leverage more favorable terms on their primary financing without losing their claim to the property. This flexibility aids borrowers in managing their debt and can facilitate the continuation of a working relationship with multiple lenders.