What Is a Mortgage Promissory Note?

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There are a lot of different words floating around throughout a real estate transaction, and this jargon can get downright confusing at times. One word that you have likely heard bounced around between real estate agents, escrow or title companies, mortgage companies or lenders, and others is a mortgage promissory note. So what is this?

A mortgage promissory note is more commonly known by other terminology that you may be more familiar with. It is synonymous for a mortgage note or a real estate note. Basically, this note is a legal document that is executed on the closing table, and it is a legal obligation for the buyer of the property to pay back the loan with interest to the lender. The note will detail all of the other details of the loan as well, such as the term of the loan, what the interest rate is, if the rate is variable or fixed, and even what steps the lender can legally take if the buyer defaults on the loan and fails to make payments as have been agreed upon in the note.

You should keep in mind that a mortgage promissory note is not just a legal document between a buyer and a bank or financial institution, but it can also be executed in the event of an owner-financed note situation. It is among the most important documents that will be signed in the event of an owner-financed note because it establishes your legal rights to pursue action against the buyer in the event the buyer does not make payments as agreed. Any time there is a discrepancy or issue with repayment of the loan, it is important that both parties refer back to the note as the legally binding document to be enforced and followed. This note is notarized and typically filed with other closing papers at closing.

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