What is the difference between a Note and a Mortgage?
By: Alison Meyer, Esq.
A note and a mortgage are documents that are usually part of a larger package of loan documents. Borrowers execute both a note and a mortgage in order to secure a lender’s interest in a loan. Although notes and mortgages are both critical to a loan package, they each serve a different purpose.
The note is a document that serves as the borrowers promise to pay. It contains information regarding the terms of the loan including the amount borrowed, the interest rate, monthly payment amount, terms of default, and other important information. The note is a confidential document and the original note is stored in a safe place by the lender. Whoever owns the original note owns the loan.
A mortgage is a document that secures the lender’s interest in the note, meaning it secures the borrower’s promise to pay. The mortgage is recorded in public record in order to put the public on notice that the lender has a secured interest on a property. The mortgage contains information regarding the loan amount, the term of the loan, provisions of default, and other important terms. The mortgage also contains the legal description of the property so that it attaches to that particular property.
Are you interested in buying a home with a loan? Do you have questions regarding the loan documents you will be executing? Are you a lender who needs to speak with an attorney regarding drafting loan documents on your behalf? If so, call the ROSS FELTY, A REAL ESTATE LAW FIRM to speak with an attorney.