Subordination Agreement Deutsch

Subordination agreements can be used in a variety of circumstances, including complex corporate debt structures. A subordination agreement recognizes that one party`s claim or interest is higher than that of another party in the event that the borrower`s assets must be liquidated to repay the debt. Subordination agreements are the most common in the mortgage field. When a person takes out a second mortgage, that second mortgage has a lower priority than the first mortgage, but these priorities can be disrupted by refinancing the original loan. The signed agreement must be recognized by a notary and registered in the official county registers to be enforceable. The mortgage borrower essentially repays it and gets a new loan when a first mortgage is refinanced, so the most recent new loan is now in second place. The second existing loan amounts to the first loan. The lender of the first mortgage refinancing will now require that a subordination agreement be signed by the second mortgage lender in order to reposition it in the top priority for debt repayment. The best interests of each creditor are changed by agreement in relation to what they would otherwise have become.

A subordination agreement is a legal document that establishes one debt as a priority over another for the recovery of a debtor`s repayment. The priority of debts can become extremely important if a debtor defaults or files for bankruptcy. Individuals and businesses turn to credit institutions when they need to borrow funds. The lender is compensated if it receives interest payments on the loan amount, unless the borrower defaults on its payments. The lender could require a subordination agreement to protect its interests if the borrower places additional privileges on the property, such as if .B they were to take out a second mortgage. Get faster translations with DeepL Pro → Translate text from any app or website with a single click Please note that vocabulary from the vocabulary list is only available in this browser. Once they have been transferred to the vocabulary trainer, they are also available on other devices. Stay tuned to protect your data Results: 15. Correct: 7. Processing time: 185 ms. Internet Explorer is no longer supported, so the DeepL translator may not work properly in this browser. We recommend that you use DeepL in Microsoft Edge or another browser.

You can also download DeepL for Windows. Subordinated debt is riskier than higher-priority loans, so lenders typically charge higher interest rates to compensate for taking that risk. How can I transfer translations to the vocabulary trainer? The “junior” debt or the second debt is called subordinated debt. The debt that has a higher claim on the asset is the senior debt. Primary creditors are paid in full, and the remaining $230,000 is distributed among subordinated creditors, typically for 50 cents on the dollar. The shareholders of the subordinated company would not receive anything in the liquidation process, since the shareholders are subordinated to all creditors. Unsecured bonds are considered to be subordinated to covered bonds. If the company defaulted on its interest payments due to bankruptcy, covered bondholders would repay their loan amounts to unsecured bondholders. The interest rate on unsecured bonds is generally higher than that on covered bonds and generates higher returns for the investor when the issuer makes its payments. Want to add a word, phrase or translation? Senior debt lenders are legally entitled to full repayment before subordinated debt lenders receive repayments. It often happens that a debtor does not have enough funds to repay all of their debts, or that foreclosure and sale do not produce enough liquid proceeds, so lower-priority debts may receive little or no repayment. Let us take the example of a company with a senior debt of $670,000, a subordinated debt of $460,000 and a total asset value of $900,000.

The company files for bankruptcy and its assets are liquidated at their market value – $900,000. .