What is a Mortgage Note Anyway? FAQ’s

I did a post on my social media and business pages back in June answering some basic questions about notes. I still get asked these questions, so why not, here’s a recap:

 

What is a mortgage note? A mortgage note (also known as a real estate borrower’s note) is a promissory note secured by a specified mortgage loan. Mortgage notes are a written promise to repay a specified sum of money plus interest at a specified rate and length of time to fulfill the payoff of the collateral.

 

What is the difference between a mortgage and a note? It’s the promissory note that contains the promise to repay the amount borrowed. A promissory note is basically an IOU that contains the promise to repay the loan. The mortgage or deed of trust is the document that pledges the property as security for the loan (collateral).

 

What is a 1st mortgage note? A first mortgage is the primary loan that pays for the property and it has priority over all other liens (except some taxes) or claims on a property in the event of default. A first mortgage is not the mortgage on a borrower’s first home; it is the original mortgage taken on any one property. Also called a “first lien”.

 

What is a mortgage lien? A mortgage lien is a non-possessory security interest in a piece of property. For a mortgage lien, it is an interest that a lender holds in real property that does not involve possession, but the property carries the encumbrance of the mortgage lien for the life of the loan until paid off.

 

What does it mean to purchase a mortgage note? Mortgage note buyers are companies or investors with the capital to purchase a mortgage note for the balance owed on the mortgage. If someone is holding a private mortgage, these buyers will give cash and take over, receiving the monthly payments that were being paid to the seller.

 

What is a mortgage note buyer? In a mortgage note, trust deeds and contracts for deeds, an individual or entity receives payments on a mortgage instead of a bank. But the buyer becomes the “bank” … Because of the need to liquidate assets, a secondary market of mortgage note buyers gives the note seller the option of cashing out their interests.

 

So, if it’s not one of the big well known banks or credit unions servicing your mortgage loan, the next time you get a notice that your mortgage has been transferred, it may be me on the other end, as your new bank!

 

©Awanna Renovation & Holdings, LLC (Dec 2019-3), zee@awannarandh.com/www.awannarandh.com

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Awanna (Zee)

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