The promissory note, a contract separate from the mortgage, is the document that creates the loan obligation. This document contains the borrower's promise to repay the borrowed amount. If you sign a promissory note, you will be personally responsible for repaying the loan. A mortgage note provides a description of the mortgage.
It is the document that indicates how you will repay your loan and use your home as collateral. People tend to use the terms “deed” and “mortgage,” and they use them interchangeably when talking about owning a property. But what really is the difference? Well, there is actually a clear difference between a deed and a mortgage, and in fact, there is an additional document that is often not mentioned, but which is the most important thing. Therefore, as a general rule, if someone is in the deed, they must be in the mortgage.
But just because they're on the mortgage doesn't mean they're on the note. For example, many times one spouse may have bad credit, so it's not in the promissory note (lenders sometimes say “they're not on the loan), but both spouses are in the Deed, so both spouses have to be in the mortgage. It's important to recognize the difference between a deed, a promissory note and a mortgage, because they definitely have different legal implications. A mortgage note is a legal document that describes the terms of a loan for the purchase of a property.
The promissory note owner can sell it at any time for a lump sum of cash to a buyer in the secondary mortgage note industry. A mortgage note is the legal contract between you and your lender that requires you to pay the mortgage. Document titles will help you differentiate between your mortgage note and other loan forms, such as closing disclosure or loan estimation. The Department of Housing and Urban Development (HUD) has a good example of what a standard mortgage note looks like.
In this case, the current owner of the mortgage note would sell the promissory note, waiving his claim to the borrower's obligations. Similarly, make sure to keep a copy of your mortgage note secure after you close your mortgage. Typically, a mortgage note is sold to a buyer when the seller no longer wants to wait for payments and needs a lump sum of cash right away. A mortgage note is a legal document that sets out all the terms of the mortgage between a borrower and his lending institution.
Mortgages allow homeowners to make incremental payments until they have paid off their loans and own their homes. According to the Consumer Financial Protection Bureau, mortgage notes include the amount you owe, interest rate, payment due dates, repayment period, and where payments will be sent. A mortgage note differs from a regular promissory note in that it is a legal contract filed with the local government (the county clerk or the deeds department) and states that the lender has a lien on your property and has the right to initiate foreclosure in court if the terms of the mortgage loan are not met. When you approach the end of the mortgage process and are ready to close a property, you will be asked to sign some documents.
However, the Uniform Commercial Code (UCC), a set of business laws that regulate financial contracts employed in all states, does in fact allow foreclosures in the event of loss of notes, according to Joseph William Singer, professor of law at Harvard University. Once the note has been signed by both parties, it is legally binding and gives the lender the ability to take legal action if the borrower defaults on the loan. Mortgage notes provide lenders with security during the loan process, since without the promissory note, borrowers would not be legally required to repay the loan. In this case, real estate investors will continue to own the mortgage note until the borrower pays his mortgage.
The borrower will not be affected by any change in the person holding the promissory note because payments will be made consistently to an external entity during the life of their loan. . .