What is a Mortgage Note? When it comes to mortgages, there are certain terms that you need to know about that you otherwise will not know if you have never gotten a mortgage before. In this article, we are going to take a look at what a mortgage note is. This is a very important term in a mortgage, and I have outlined the importance of your receiving that mortgage note.
When a mortgage deal is about to be closed between the borrower and the lender, it is often required that a mortgage note be signed. If you do not sign the mortgage note, you are basically not under any legal obligation to obey the terms and conditions of the mortgage that you received from your lender, and today we are going to know what this means.
What is a Mortgage Note?
A mortgage note can also be known as a promissory note, which is basically a legal agreement between you and the lender that you will repay your mortgage. If you got your mortgage without having to sign this note, this means that you will have no legal obligation to pay back the money you received from the mortgage. So legal action cannot be taken against you.
This is the reason why, after closing a mortgage deal, you and the lender will be summoned to sign a promissory note, which is also called a mortgage note. This note basically shows you the terms and conditions that you agreed upon before the lender gave you the mortgage. On that note, you will find the amount you owe, the interest to be paid, and every other piece of information I’ve gotten about the mortgage.
How a Mortgage Note Works
Just as I mentioned above, if you got a mortgage without having to sign a mortgage note, this means that you can default on your payment without getting penalized legally. This is due to the fact that there is no legal obligation for you to pay the mortgage if you do not sign a mortgage note. But when you sign a mortgage note, you are legally binding yourself to repay your mortgage.
in the sense that if you fail to pay your mortgage, the lender has every right to take legal action against you, including foreclosure of your property. And this is according to the terms and conditions of your contract, which is also included in your mortgage note. This is the reason why it is very important to thoroughly read through your mortgage note to understand everything in it.
Types of Mortgage Notes
When someone asks you to come and sign a mortgage note, they are basically telling you to come and sign two different notes. which means you can say that a mortgage note is composed of two different types of notes. We have the:
- a promissory note, which is a legal document that you have to sign to agree to the terms and conditions of the mortgage you are taking. This note essentially contains all of the details about the mortgage you are about to take: the amount owed, the interest to be paid, the payment date, and so on. It also explains the consequences of defaulting on payments.
- Mortgage: The mortgage, on the other hand, is the document that gives your lender the legal right to take the property in case you fail to make regular payments. This means that if you violate the terms and conditions written in the promissory note, the lender has the legal right—by signing this note, you are signing for the lender to take away the property, and you can’t do anything.
So in a mortgage note, there are basically two documents that you have to sign: the promissory note and the mortgage note. This is why it is critical to read the mortgage note before signing so that if there is anything you do not agree with, you can work it out before signing.
What Exactly Is the Meaning of a Mortgage Note?
Now that you have seen that there are basically two documents contained in a mortgage note, let’s take a look at the things that are inside these documents. Before that, it is very important that you know that mortgage rates do not vary from one lender to another. But basically, in every promissory note, you will find the things listed below:
- The total amount you are borrowing, which is the amount of the mortgage loan,
- the interest rate you’ll be required to pay This will be the initial interest rate you pay if you have an adjustable-rate mortgage; the paperwork will detail how and when your interest rate will be modified.
- The sum of the down payment
- whether biweekly or monthly payments is necessary.
- whether a penalty for early payment exists.
- It might also outline the repercussions of making payments late.
These are some of the things that you will see in a promissory note, and keep in mind again that they are different from one lender to another.
Why is a mortgage note important to the borrower?
It is very important for you to have a copy of this note because it clearly states the terms and conditions of the mortgage that you have gotten. Should the lender decide to play pranks or bring things that were not part of your agreement, you can quickly refer back to business. A house is a very big financial commitment, so you need all the proper documentation.
How to Get a Copy of the Mortgage Note
It is customary that you will receive a copy of your mortgage note once it has been signed by you. However, if you have misplaced your copy, you can also get another copy from your mortgage issuer or lender. All you need to do is basically get in touch with your mortgage lender to ask for or request a copy of this note.
You may be required to submit a written request for a copy of the mortgage note; however, keep in mind that the current loan owner may not be the person with whom you signed the document. This is because lenders usually sell loans to other lenders. In the case that your loan was sold, the old or new lender will be responsible for providing you with a new copy.