We are all aware of mortgages and how important they are. But what is a mortgage note?

A mortgage is a type of loan contract secured by real estate. 

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Fewer people know what a mortgage note is. In fact, it’s a very common question.

In this article, we will tell you exactly what it is . We will also cover some of the key things about mortgage notes. This includes what it does, the difference between a mortgage note and promissory note, and more.

What Is A Mortgage Note?

A mortgage note is a type of legal document you sign when you close on your new home. It basically covers the details and key terms of your mortgage. 

It contains information such as how much the borrower (you) will pay the lender (the mortgage company). 

In addition to that, a mortgage note also contains other details, such as deadlines for payments for the borrower. Basically, it is a legal document of the contract between the lender and the borrower. 

It will generally specify the following: 

  • The amount of money borrowed
  • The amount that should be paid in down payment
  • If your interest rate is fixed or adjustable
  • Who the lender/s and borrower/s are
  • The plan for payment
  • If there is any penalty if you pay off your mortgage early
  • Whether the payment is monthly or bimonthly

What Does A Mortgage Note Do? 

It’s main purpose is to give assurance to lenders that there is a legal agreement between them and the borrower. It gives lenders the confidence that the borrower is bound to pay the money that they owe on time. And lays out what may happen if they don’t.  

Who Holds The Original Copy?

The original mortgage could be held by the lender/lending institution or by a real estate investor. The lender/lending institution can sell the mortgage note to real estate investors/other financial institutions in the secondary market. 

The borrower will only have the original document if they have fully paid their loan.

What Is The Difference Between A Mortgage Note And A Promissory Note?

Even though a promissory note and a mortgage note are often considered the same, that is not always the case. 

A promissory note is a document that outlines the terms to pay back the lender/lending institution. It includes things like the interest rate and method of payment.

These two documents will often accompany each other. However, these two documents are not too different from one another. 

There you have it. Now you have a better idea of what this important document is, what it does, and what makes it different from a promissory one. 

Hopefully, all of this information has helped you gain more insight into what these legal documents are so you can recognize them when you’re buying your very first home.

Call Now For A Free Reverse Mortgage Quote

833-432-6968

9am-9pm EST, Mon-Fri

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