Business and Personal Finance Dictionary

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• SUBORDINATION CLAUSE
  
  A clause in which the holder of a mortgage permits a subsequent mortgage to take priority. Subordination is the act of yielding priority. This clause provides that if a prior mortgage is paid off or renewed, the junior mortgage will continue in its subordinate position and will not automatically become a higher or first mortgage. A subordination clause is usually standard in a junior mortgage, because the junior mortgagee gets a higher interest rate and is often not concerned about the inferior mortgage position. (See junior mortgage)
  
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