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What is a Mortgage Note?

A mortgage note is a common term used for a promissory note secured with real estate by a deed of trust or mortgage deed.  Basically, it is a written promise to pay a specified sum of money plus interest over a specified period of time.

Homebuyers usually think of the mortgage or deed of trust as the contract they are signing with the lender to finance the purchase a house, but it is actually the promissory note that contains the promise to pay the amount owed.

A promissory note is basically an IOU that contains the promise to pay the loan, as well as the terms for payment.  The note includes the:

  • name(s) of the borrower
  • property address
  • interest rate (fixed or adjustable)
  • late charge amount
  • amount of the loan, and
  • term (number of years).

Unlike a mortgage or deed of trust, the promissory note is not recorded in the county land records.  The lender holds the promissory note while the loan is outstanding.  When the loan is fully paid off, the note will be marked as paid in full and returned to the borrower.

Mortgage notes can be worth any amount ranging from $10,000 to tens of millions of dollars.

Privately-held mortgage notes can be bought and sold with relative ease.  These notes can be sold in entirety or in part depending on your needs.  Give us a call if we can answer your questions and help you fulfil your needs.