A mortgage note is a legally binding document that exists between a lender and a borrower. Furthermore, the purpose of this document is to assure the lender that the borrower will pay. However, if they fail to do so, the lender has the right to foreclose on your property. Below, there is more information about this type of document, so let us begin to read through it.
What is a Mortgage Note?
A mortgage note, also known as a promissory note, is a legal document showing the terms of a property purchase loan. This means that when you sign it, you are closing on a mortgage. Your promissory note also shows the terms and conditions of the loan.
According to experts, it is also a form of protection for lenders. Therefore, you do not have to worry about protecting your interest in a property. So, if a borrower defaults on payment, the lender can take back the property or foreclose it.
How Does It Work?
The basic purpose of a mortgage note is to provide lenders with security and a guarantee that they can lend you money. However, this is because borrowers will not be legally bound to repay the loan. But when both parties sign the note, this gives the lender permission to take legal action if the borrower fails to repay the loan.
Additionally, when you default on a loan, it means that you have not made one or more payments, which also means that you failed to keep your end of the agreement. Sometimes, borrowers lose their collateral, especially if your loan type is secured. Nevertheless, once the repayment for the loan is complete, you will have full control of the property.
Details on a Mortgage Note
Here are the following information or details on your promissory note:
- The amount you borrowed.
- Interest rate.
- Your legal full name.
- Down payment amount.
- Name of the lender.
- The start date and maturity date of the loan (repayment plan).
- And lastly, the consequences of failing to repay the loan.
Mortgage notes also show the additional fees as well as interest rates associated with or related to the loan agreement. So, as a borrower, you are promising to pay back the loan according to the terms and agreement in the note.
What Does It Look Like?
Normally, promissory notes are titled as a note, borrower’s note, mortgage note, or even promissory note. What’s more, the titles on this document will assist you in characterizing your mortgage note as well as other loan forms. For instance, loan estimates and closing disclosures In addition to this, it is normally 2 to 3 pages in length.
Who Holds the Mortgage Note?
Normally, it is held by your original lender. In other words, when you apply for a loan or mortgage from a certain lender, this lender will be the one holding and responsible for your promissory note.
But lenders are also permitted to sell these mortgage notes to buyers in the secondary market in exchange for a lump sum of money. For this reason, many lenders can sell a portion or the whole note. Nevertheless, if a promissory note is sold, all information and details will remain intact. The only thing that changes is who the payments go to.
What Happens to a Mortgage Note If You Default?
As a borrower, if you fail to pay back or default on a mortgage, the lender will proceed with legal foreclosures. This means that whatever both parties agree on in the mortgage note, your default will be implemented. But before any further action, you will receive a notice of default.
When this happens, it is advised that you contact the lender and create a loss mitigation plan so that the lender does not sell the house. To sum up, avoid defaulting at all costs.
How to Get a Copy of Your Mortgage Note
Getting a mortgage note is not much of a hassle. Normally, the lender gives you a copy after you have signed it. However, if you lose your original copy, you can still request another.
To do so, contact the lender, and they will send you another copy. According to the Federal Servicer Act, any information or written requests regarding a loan should be responded to by loan servicers. Hence, you can go to your county’s official record department to check.
This is because various documents are filed in public records. Land attachments, mortgages, and deeds are no exception. With this in mind, you can visit your county’s website to ask for a copy of yours.
Frequently Asked Questions
What is Another Name for a Mortgage Note?
A lot of people recognize this slip as a mortgage note, but another name for it is a promissory note.
Can I Sell My Own Mortgage Note?
If you are a lender or have ownership of the mortgage note, then you also have the right to sell it. Moreover, these promissory notes can be sold in exchange for a lump sum of money on the secondary market.
Why Is It So Important?
A mortgage note is a very important legal document that defines the lending terms of your mortgage repayment plan. This way, it is easy to pay it back. Besides, if you do not have one, your repayment plan will lose structure, and the lender has no legal protection if you do not meet the payment requirements.