Promissory Note
The signed legal instrument in which a borrower promises to repay a specified sum under defined terms.
In a mortgage transaction, the promissory note is the borrower's actual promise to repay, separate from the mortgage or deed of trust, which is the lien instrument that secures the note. The note governs the financial relationship; the mortgage governs the collateral relationship.
Notes are negotiable instruments, they can be transferred from one holder to another, which is exactly what happens when a loan is sold in the secondary market. The party that holds the original note is the entity legally entitled to enforce its terms.
When a loan is paid off, the original note is marked paid in full and returned to the borrower along with a release of the lien recorded at the county. Keeping these documents permanently is wise even though digital records are now the standard.
Related terms
Other terms you'll see alongside Promissory Note
The borrower's signed promise to repay the loan, including the amount, rate, term, and payment terms.
A legal claim against property that secures a debt and must be paid off before clear title can transfer.
The asset pledged to secure a loan, which the lender can take and sell if the borrower defaults.
The company that collects monthly payments, manages the escrow account, and handles borrower service on a loan after closing.
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