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- About Home Equity Loans In Texas And How Can One Obtain It - November 27, 2023
About Mortgage Note
When buying a new home, you will come across so many mortgage terms, it can feel like you’re learning a whole new language. Pre-approvals, appraisals, and many other terms for a first-time homebuyer can be a little bewildering.
If you are looking for a mortgage, the more you know, the more confident you’ll be with each transaction during the life of the loan.
Today let us briefly explain another key concept while a new home purchase, which is – the mortgage promissory note or also called a mortgage note.
Understanding A Mortgage Note
Fundamentally, a mortgage note is an agreement stating that the borrower will be paid back the money borrowed from a lender.
The mortgage note also explains how the loan will be repaid, with details about the monthly payment amount and duration of time for repayment.
The home loan process involves both a mortgage and a mortgage promissory note, the mortgage note can also be used separately in a lending relationship between two individuals.
To make it simple, a note is merely a promise to pay back the amount of money that is borrowed in a set amount of time.
According to David Reiss, a law professor at Brooklyn Law School in New York and real estate expert, the promissory note is another way of saying IOU for the home loan.
Mortgages And Mortgage Notes: An insight
Although the financial details of the loan’s repayment, such as the interest rate and method of payment are provided by the mortgage note, the procedure that will be followed if the borrower doesn’t repay the loan is specified in the mortgage itself.
For example, the lender can demand complete repayment if the loan goes into default or that the property can be sold if the buyer fails to repay the loan is explained in the mortgage loan.
The mortgage note is a private contract between the client and the lender in the case of a home loan, and the regional government records office files the mortgage.
Once you have paid off your loan, then a document releasing you from the liability of the mortgage or deed of trust and the promissory note will be recorded by the lender.
It’s A Package Deal
A mortgage and a mortgage promissory note are not a question of one or the other, in the home loan process. They both play well-defined roles in the relationship between the lender and borrower.
Reiss explains that a transaction where a borrower borrows money from the lender and signs a promissory note that shows the arrears, as well as a mortgage that gives a security interest in the home in case the debt is not paid back, is all referred in a home loan contract.
There are however a few specific instances in real estate where you might use a mortgage note without the accompanying mortgage part of the home loan.
For eg, it is not unusual for a family member from a farming community to just use a promissory note and sell a piece of property to another family member.
Buying And Selling of Mortgage Notes
You need to be aware of the fact that the mortgage lender who is the holder of your mortgage promissory note, can sell your mortgage note without first seeking your consent.
Purchasing promissory notes through brokerages or as part of larger mortgage bundles can sometimes present a profitable opportunity for a mortgage and real estate investors.
Even though if the note is sold the details of your mortgage established in your mortgage note won’t change, the recipient of your monthly mortgage payments likely will.
If this ends up being the situation, to ensure that it isn’t a case of fraud and that the ownership of the note has actually changed, it would be advisable to double-check the status of your promissory note.
Way To Obtain A Copy Of Your Mortgage Note
You’ll receive a copy of your mortgage promissory note with the rest of your closing documents when you close on a property.
If anything untoward happens to your copy like suppose you misplace it or somehow it by chance gets destroyed then you can request a new copy of the note from either your lender, the registry of deeds, the county recorder’s office, or if you worked with one then from your mortgage broker as well.
Know that the terms of the note will not change even if your mortgage note gets sold, but remember to ask for an updated copy of the note from the new owner.
Get Started Shopping For A Mortgage
Mortgage promissory notes are your obligation as a borrower to your lender, it is an important real estate document that contains valuable information.
For homeowners who want to know what the terms of their mortgage loan are, they need to become familiar with the features of their mortgage note, this can be extremely useful and help them make more informed financial decisions for their future.
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