What Is A Mortgage Note?

Certified Mortgage Advisor
NMLS 1701021
Published 
October 15, 2018

What is a mortgage note?

Most of the time when people think of a mortgage, they're thinking of the money that they'll receive to be able to purchase a property. But in reality, there are actually two documents that we're talking about here. One is the promissory note and number two is the mortgage.

Promissory note

So let's talk about the promissory note first. So the promissory note is the document that's detailing that you will be receiving a loan, and it's a promise that you'll repay the loan. So it's detailing who you are as a borrower, who the lender is, the interest rate, the terms of the loan, the type of loan, and things like when your payment is due, as well as some of the late fees for the payment. So all the promissory note is saying is we're receiving this money as a loan, and we promise to repay that loan.

Mortgage

So let's move on to the mortgage. The mortgage is the document that's actually securing the loan. It pledges the subject property to secure the promissory note.

Promissory note vs. Mortgage

The promissory note is here is the money that we're borrowing, we promise to pay back, and the mortgage is here's the subject property in the event that we breach the contract of the loan, or we miss payments and don't pay back the loan. So those are the main differences between the promissory note and the mortgage.

Keep this in mind

Now, something to remember with the promissory note is that most of the time lenders will end up selling that note onto the secondary market in bigger companies like Fannie Mae and Freddie Mac. So those will go on the secondary market.

No changes in your investment

Something to note is that your long terms will never change. If the loan is sold, all that will happen is the servicing of the loan will be with another company. So another company will be the one to collect the payments if the loan is sold in the future, but those terms will never change.

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