A promissory note is a key piece of a mortgage loan application and mortgage agreement, which ensures that the borrower agrees to be in debt to a lender for repayment of the loan. Ultimately, it serves as a necessary piece of the legal puzzle that helps ensure that sums are refunded in full and in a timely manner. A promissory note establishes a clear record of a loan, whether between individuals or between entities. By placing all relevant details in writing, a promissory note ensures clarity of payment due dates and amount of payments.
A promissory note can be insured or unsecured. An unsecured note refers to a loan that is made based solely on the manufacturer's ability to repay. A secured promissory note means that the loan is secured by an element of value, such as a house. When issuing a mortgage loan or other real estate purchase, you would use a real estate promissory note.
The home or real estate will be the security for this promissory note, and if the borrower fails to pay his payments, the lender can impose a lien on the property. Essentially, a mortgage note is an agreement that promises that the borrower will return the money borrowed from a lender. The mortgage note also explains how the loan should be repaid, including details about the amount of the monthly payment and the length of the payment. A car note is an agreement where a borrower agrees to make payments in exchange for a vehicle.
The promissory note form dictates all the terms necessary for repayment of the loan, as well as the consequences of not repaying the loan. When lenders lend money, especially when it is a large sum, they formalize the loan by creating a promissory note. The promissory note has become an excellent and frequently used instrument for people to obtain or lend finance during a time when traditional financing is much more difficult to obtain. One of the most important legal documents that you should understand and review carefully before signing is the promissory note.
If you are lending money to an individual or company, you may want to formalize the loan by creating a promissory note. The most important elements of the promissory note are the financial details, as well as the dates when everyone has financial obligations. Mortgage notes are important real estate documents that contain valuable information about the borrower's obligations to his lender. If there is no guarantee to secure the loan, the lender on the note can take the borrower to court to request repayment.
Promissory notes aren't the same as mortgages, but the two tend to go hand in hand when someone buys a house. The deed to the house also acts as security on the promissory note and, in the event that the buyer defaults, the seller keeps the deed and the down payment. In a real estate transaction involving a mortgage, the lender (a large financial institution, alternative lender, or private investor) would be the beneficiary, while the homebuyer entering into the loan agreement would be the originator or issuer of the promissory note. It's important to understand that the holder of your mortgage note, usually the mortgage lender, can generally sell your mortgage note without first asking for your consent.
Investment notes reduce the risk of investing in a business by ensuring that investors receive their return on investment for a specific period of time. It is important to note that promissory notes bind the issuer and the payee to an agreement and, as such, it is a legal instrument similar in nature to any common law contract.
