If, for example, someone used a promissory note to secure an owner financing deal and then decided that they did not want to wait many years for repayments, they would have the option of selling their note to one of the many companies that buy mortgage notes. Mortgage deeds, on the other hand, cannot be sold.
These clauses have a tendency to make it much harder to sell your home without paying off your loan in full first. Even though these two documents often go together, the mortgage note definition and the promissory note definition are very different. Abby is the co-founder and Chief Acquisitions Officer.
See full bio. Your email address will not be published. Save my name, email, and website in this browser for the next time I comment. This site uses Akismet to reduce spam. Learn how your comment data is processed. What is a promissory note? What is a mortgage? Below we outline what each means, their differences, and why this is important. A promissory note is a document between the lender and the borrower in which the borrower promises to pay back the lender, it is a separate contract from the mortgage.
The mortgage is a legal document that ties or "secures" a piece of real estate to an obligation to repay money. The mortgage itself does not obligate anyone to repay money. If a person's name is on the mortgage to a piece of property, then that person may not be required to repay the loan. The mortgage does not create personal liability. We determine who is obligated to repay the loan by looking at the promissory note. Who Is Obligated to Repay? Only those who sign the promissory note are required to repay the money lent under the promissory note.
If a married couple takes out a loan in the husband's name, then most lenders will require that the wife be named in the mortgage. So long as only the husband signs the promissory note, the wife has no personal obligation to repay the loan.
This is a critical distinction and is often misunderstood. You Need to Know This! More from This Author. Deed vs. Note vs. Subscribe to our Newsletters. Subscribe to our Newsletters Get the latest news and information from the trusted professionals at Stock and Leader delivered straight to your inbox. All Rights Reserved. But mortgages are commercial as the payment is made to a financial institution or a bank.
Mortgages generally involve a financial institution or a bank, but notes only involve individuals. A note outlines the total amount borrowed, interest on the money, and the mode of repayment. It may also contain an acceleration clause which means that the whole amount is automatically due after a payment is missed. Mortgages also outline the amount of money, interest rate, and mode of repayment. A note is a document that an individual signs promising to pay the other person or lender the sum that has been borrowed.
A mortgage is a document that an individual signs with a lender by pledging the property against the money that is borrowed. Difference Between Mortgage and Note. Difference Between Similar Terms and Objects. MLA 8 S, Prabhat.
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