What Is a Mortgage Note?

A mortgage note—also known as a promissory note or even a mortgage promissory note—is a legal document that binds you to repay your mortgage within an agreed period. The note also outlines the terms of your lending agreement with your mortgage provider. This includes your monthly payment amount, how much interest you’ll pay on the mortgage, and what happens if you’re late on a payment or miss it entirely.

Since a mortgage note is legally binding, it’s important that it is accurate. In this article, we’ll explain the purpose of a mortgage note, and how to check that yours is correct.

Key Takeaways

  • A mortgage note is a legal document that you sign when closing on a mortgage.
  • The mortgage note consists of a promissory note, and a mortgage or deed of trust.
  • The mortgage note contains key details about your loan: your interest rate, monthly installments, and charges that you’ll be on the hook for if you’re late on your payments.
  • The mortgage note also establishes your property as collateral for the loan.
  • Before signing, check your mortgage note. It’s legally binding.

What Is a Mortgage Note?

When you get near the end of the mortgage process, and you are ready to close on a property, you’ll be asked to sign some papers. Normally, you’ll be invited to the title company (or attorney’s office) for a closing meeting. At this meeting, you’ll be asked to sign a mortgage note.

When people refer to a mortgage note, they are generally referring to at least two distinct documents:

  • A promissory note, which is the legal document that you sign to agree to repay your mortgage. The note will provide you with details regarding your loan, including the amount that you owe, the interest rate of the mortgage loan, the dates when the payments are to be made, the length of time for repayment, and the place where the payments are to be sent. The note also explains the consequences of failing to make your monthly mortgage payments.
  • A mortgage (also sometimes called a security instrument), which is the document that gives your mortgage provider the right to take your property if you fail to pay your mortgage on the terms that you’ve agreed to in the promissory note. It will restate the information that appears on the promissory note.

The U.S. Department of Housing and Urban Development (HUD) has a good example of what a standard mortgage promissory note looks like.

Together, these two documents are referred to as a mortgage note. It is very important that you check that they are correct before signing them, so read through them carefully. If you are unsure about anything, ask your mortgage provider for clarification before signing them.

If the occupancy section states that you will occupy the property as your principal residence, then you must do so.

What Does a Mortgage Note Contain?

Mortgage notes vary a little among lenders, but every mortgage note will contain the same basic information. On the promissory note, you will find:

  • The amount of the mortgage loan—that is, the total amount that you are borrowing.
  • The interest rate that you will pay. If you have an adjustable-rate mortgage, this will be the initial rate that you will pay, and the document will explain how and when your interest rate will be adjusted.   
  • The down payment amount.   
  • Whether monthly or bimonthly payments are required.   
  • If there is a prepayment penalty.   
  • It may also explain the consequences of being late with your payments.

The mortgage itself (sometimes called a security instrument) will repeat this information, but it also will explain your responsibilities and rights as a borrower. Crucially, this is the document that offers your property as collateral for the loan—and allows the lender to take back your property if you fall behind in your payments.

The mortgage will also normally specify some terms. Note that if the occupancy section of this document states that you will occupy the property as your principal residence, then you must do so. There also might be a clause that states you cannot store hazardous substances on your property.

Who holds the mortgage note?

When you sign the mortgage note, it will be held initially by your mortgage provider. It’s very likely, however, that they will quickly sell it on through the secondary market. This doesn’t affect your rights or obligations as the recipient of the loan.

What if the borrower defaults?

If a borrower defaults on a mortgage, the lender can start foreclosure proceedings. The party pursuing the foreclosure—whether this is the original lender or not—must produce the mortgage note. Some foreclosures have been defeated because the mortgage note could not be produced. However, the Uniform Commercial Code (UCC), a set of business laws that regulate financial contracts employed across states, does in fact allow foreclosures in case of lost notes, according to Joseph William Singer, a law professor at Harvard University.

How do I get a copy of my mortgage note?

You’ll receive a copy of the promissory note when you close on your house, but if you lose that paperwork, there are ways to replace it. You can contact the note holder to send you a copy. You can also reach out to your county’s recorder of deeds to have them reproduce a copy of your note.

The Bottom Line

A mortgage note is a legal document that you will sign when you close a mortgage. It gives details of how much you are borrowing and how you will pay it back. Crucially, it also establishes the property as collateral for the loan.

It’s very important that you check that your mortgage note is correct before you sign it. If it gives different terms from what you’ve agreed to with your lender, contact them for clarification. Equally, make sure that you keep a copy of your mortgage note safe after you’ve closed on your mortgage.

Article Sources

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  1. Consumer Financial Protection Bureau. “Guide to Closing Forms,” Pages 1–2.

  2. U.S. Department of Housing and Urban Development. “Adjustable Rate Note.”

  3. Harvard University, Joseph William Singer. “Bank Has Standing to Foreclose Despite Inability to Produce the Note on Which the Mortgage Was Based.”