August 23rd, 2018 10:39 AM by Jackie A. Graves, President
is a mortgage note? Also known as a promissory note or deed of trust note,
it's the basic loan contract given to you by your lender—the document you
signed on the dotted line to make your deal official.
mortgage note is an important piece of paperwork to keep in your files for a
variety of reasons. Here's a rundown of what's on this document, and why it
What is a mortgage note?
mortgage note lays out all the specifics of your loan, including the following:
note is also a contract pledging your property as security for the money you’re
borrowing. It gives the lender the right to repossess the property if you don’t
keep your end of the bargain by making payments promptly and regularly, as
spelled out in the contract.
As you can
see, your mortgage note is an essential contract and an important legal
document, so if you’re buying a home for the first time, make sure you put your
mortgage note in a safe place where you know you’ll be able to find it.
would be a good idea to have a digital copy of it as well, in case your home is
destroyed by flood or fire. However, if disaster strikes and you're unprepared,
know that your lender has a copy as well.
other lending institutions are not the only ones to issue mortgage notes. In
fact, “Mortgage notes are often associated with sales of property using owner
financing," says Alan Noblitt, owner of
Seascape Capital, based in San Diego.
With owner financing, the
homeowner not only sells the home, but also loans the buyer the money to make
owner financing can be a form of financing for buyers who experience
difficulties obtaining a traditional mortgage loan through a bank,” Noblitt
then pays this loan back monthly, plus interest, much like a conventional loan.
This type of financing, however, typically lasts only a few years—at which
point the buyer tries to refinance and apply for a conventional loan from a
Just so you
aren't surprised later on, here's a fun fact: Your lender can sell your
mortgage note without your permission. This happens more often than you might think,
and it can happen more than once during the life of your loan.
bundle mortgages together and sell them to investment companies, and the
transactions get really complicated. The important thing to know is that the
terms of your mortgage note do not change with each new owner, who
is required by law to see that the terms remain the same.
So when you
get that notice in the mail saying that you’re now making payments to Bank XYZ,
instead of to Bank ABC, whom you’ve been paying all along, don’t sweat it. The
only thing that will change is the address where you’re sending your payments.
fact: You can buy other people’s mortgage notes. Mortgage notes can be good
investments for those who want to
get involved with real estate, but are not interested in "the three
T’s of landlording: tenants, toilets, and trash," according to real estate
investment expert Joel Cone.
notes can be purchased through mortgage note brokerages (you can find hundreds
online). They can also be purchased in shares of mortgage bundles through real estate investment trusts or other
similar products. This is a fairly complicated venture, however, so you’ll want
to do lots of research before you jump in.
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