A mortgage loan is any debt in which the borrower conveys to the lender an interest in real property, as security for the debt. What many people fail to realize is that the mortgage loan contains two inter-connected but essentially separate parts: the mortgage and the promissory note.
This lengthy article will review the elements and issues of both important documents in the following sections (click to jump to link):
The mortgage instrument is the document that the borrower uses to give his or her property as collateral for the loan. Much like but not quite a deed, the mortgage instrument conveys an interest in the real property to the lender (mortgagee). The promissory note is the contract by which the borrower promises to repay the loan.
As most property owners may have noticed during their purchase loan closing, two of the most important documents signed during the closing were the promissory note and the mortgage instrument. They correspond to the two parts of the mortgage loan-the mortgage and the loan. Both parts will be discussed in greater detail below. You can also view a sample mortgage deed or sample promissory note by clicking on the links.
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