A lifting clause is the clause that gives the borrower the ability to replace the primary finance instrument with another without affecting the position of the subordinate instrument.
In a financial market or dealing, the lifting clause refers to thr provision in a second, third, or junior mortgage that typically allows the liens ahead of it to be paid off and refinanced for the same or a lesser amount; all these without sacrificing their priority in lien positions.
In a mortgage deal, without the lifting clause, an investors with second mortgages could never refinance the first ones because, the instant the first mortgage was paid off and the second lien-holder would immediately advance to first position.
In conclusion, the lifting clause is the clause that gives the borrower the ability to replace the primary finance instrument with another without affecting the position of the subordinate instrument.
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