Subordination Legal Meaning and Definition

Here is a simplified definition of the legal term Subordination.

Subordination (noun):

Subordination refers to the process where a lender (such as a bank) agrees to prioritize a new debt (such as a mortgage or charge) above their own existing claim on a certain property. This causes the first lender to lose their priority rights on the property. If the property is sold to repay the new debt, the first lender only receives any remaining funds after that debt is fully paid.