What type of loan is most likely to include a subordination clause?

A loan for the purchase of vacant land when construction is planned is most likely to include a subordination clause because it is common in construction financing. A subordination clause allows a lender to maintain priority over other debts secured by the property once it has been developed or improved.

In this context, when financing the purchase of land that will be developed, lenders want assurance that their loan will have priority over future financing that might be needed for construction. This is critical because, during the construction phase, the property's value may not fully reflect the potential it holds once fully developed, which can increase the risk for lenders. By including a subordination clause, the lender ensures that their interest is protected and takes precedence over other liens that may be placed on the property during or after the construction process.

This clause is less typical in loans for primary residences, investment properties, or refinancing existing debt, as those scenarios usually involve established properties with known values and less risk regarding future financing arrangements.