What Is a Subordination Agreement?

Short answer

A subordination agreement is a signed, recorded document in which your HELOC or second mortgage lender agrees to stay in second place behind a new first mortgage, so you can refinance the first loan without paying off the second. In Florida it is recorded with the county clerk, and recording costs about $10 for the first page and $8.50 for each extra page under F.S. 28.24 (as of November 2026).

Definition

A contract that changes lien priority. The lender holding a junior lien (usually a HELOC or fixed second mortgage) agrees that a new first mortgage will be paid first if the home is ever sold or foreclosed.

Worked example

Example only, not a quote: a Westchester owner has a $280,000 first mortgage and a $60,000 HELOC. She refinances the first loan into a new $280,000 rate-and-term loan. When the old first is paid off, the HELOC would move up to first place, so the new lender asks the HELOC lender to sign a subordination agreement. The HELOC lender reviews the new loan amount, signs, and the title company records the 3-page agreement with the new mortgage. Recording math under F.S. 28.24: $10 for page one plus $8.50 x 2 = $27. If she had instead paid off the HELOC with the new loan, no subordination would be needed, but Fannie Mae treats paying off a non-purchase-money second as a cash-out refinance.

How the process works

• New lender asks: once your refinance is approved, the new first-mortgage lender or title company requests subordination from the HELOC or second lender.
• Second lender reviews: it usually looks at the new loan amount, your combined loan-to-value and your payment history. Some charge a processing fee; it varies by lender.
• Signed and recorded: the agreement is signed, notarized and recorded with the new mortgage so the public record shows the right order.

Per Fannie Mae's Selling Guide (as of November 2026), when subordinate financing stays in place the lender requires a resubordination agreement to be signed and recorded, unless state law keeps the second lien in its position automatically. The lender also counts every lien on the home when it figures CLTV and HCLTV, so a large HELOC line can limit how much you can borrow on the new first.

Tips to avoid delays

Start early: the second lender's review can be the slowest step in a refinance, and a rate lock has an end date. Do not draw more on the HELOC during the refinance, since the new lender approved a specific balance. If the second lender refuses, the options are to pay off or pay down the second, or to fold it into a cash-out refinance. Rates vary daily; call 305-425-1990 for today's pricing.

In South Florida

In Florida, lien order follows the public record: under F.S. 695.01 a mortgage is not good against later creditors or buyers unless it is recorded, so recording matters. That is why a refinance with an open HELOC needs a recorded subordination agreement in the county official records (Miami-Dade, Broward or Palm Beach clerk). Many South Florida owners opened HELOCs on large equity gains, so this comes up often. See HELOCs in Florida and refinancing in Florida.