What Is a Mortgage Promissory Note?

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A real estate lender will ask a borrower to sign a mortgage promissory note during most real estate transactions. This provides legal protection to the lender in the event a borrower refuses to repay what he owes on his mortgage.

The Promissory Note

The promissory note is a legal document you must sign stating that you understand your obligation to repay a certain amount to the lender over time for the right to retain ownership of the home. It is a standard part of all real estate contracts.

Promissory Notes and Liens

A promissory note is only a portion of the guarantee a lender needs for a loan as substantial as a mortgage. Promissory notes serve to secure the lender’s interest in the property along with a mortgage lien. The lien allows the lender to seize the home if a borrower stops making regular payments. Once the mortgage debt is paid in full, the lien will be released, and the promissory note will no longer be valid.

Filing the Documents

In most states, lenders will file a copy of the promissory note with the Registrar of Deeds in the land records office where the property is located. Filing locations and specific requirements of the promissory note may vary depending upon the state the borrower lives in.