At the conclusion of your home purchase, two key legal documents you will sign include a mortgage and note. These legal instruments should accurately represent your agreement with your lender.

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But, it can be easy to be confused between mortgage and note documents, so this article aims to clarify their difference and help you better understand them.

The Promissory Note

A promissory note is a legally-binding promise to pay back a loan. It includes details about debt repayment, such as how much is owed, when and how it should be paid back, interest rate and terms of payment. Though not recorded in county land records, promissory notes act as security for their lenders.

Mortgage notes contain the terms of a mortgage agreement. They often detail requirements that borrowers must fulfill to maintain the property, such as paying taxes and maintaining homeowner's insurance, while some even specify that if payments fail they could sell the mortgage to recover payments owed to lenders.

Importantly, it's essential that you realize the holder of your mortgage note can sell it without first seeking your consent. Typically, this would be the lender that initially originated your mortgage loan and they must inform you immediately of this change as well as all terms and conditions including any penalties due to late payments or early termination.

The Mortgage

Homebuyers who take out loans to purchase their homes typically sign two documents as security for the loan: a mortgage (also referred to as deed of trust in some states) and promissory note. A mortgage provides security by attaching your home to your debt and giving lenders permission to sell it if payments go unfulfilled if default occurs.

Your mortgage outlines your responsibilities as a homeowner, such as maintaining and paying real estate taxes on time. Furthermore, an acceleration clause permits lenders to demand all remaining balance of your loan be paid at once should payments become delinquent.

Your mortgage payment should include both principal and interest, with their amounts determined by your loan's amortization schedule. When closing, a copy of your mortgage document will remain attached to your property until all debts have been satisfied in full.

The Deed

Deeds are legal documents used to formally transfer ownership of real estate between seller and buyer. They include information such as their names, property description and signature of both parties before being notarized publically. Deeds often come accompanied by mortgage deeds in order to create a lien against it.

The deed also details the borrower's responsibilities and may require them to fulfill duties like keeping the property up-to-code, paying taxes, and maintaining homeowner's insurance on it. Furthermore, it allows lenders to foreclose on properties if borrowers fail to fulfill their obligations as stated in their mortgage deed.

Borrowers often don't receive their deed until after paying off their mortgage, which makes working with an established investment company essential. A professional can explain the distinctions between mortgage notes and deeds.

The Assignment

Mortgage loans are one of the many loan transactions. Some are granted to individuals to help them purchase real estate while others are provided to investors to secure property investments. Both types of loans utilize mortgage deeds and promissory notes as legal collateral.

Though they share similar characteristics, there are distinct distinctions between a note and mortgage loan. A note is a contract binding a borrower to repay his or her loan; it can even be transferred as an asset; often through wage assignments which allow an employer withhold funds from employee paychecks to cover child support obligations or other debts.

However, lenders use mortgages as legal leverage against defaulting borrowers and foreclosure proceedings, ensuring they will get paid. Lenders to mortgage loans may sell these rights off to third parties and require new mortgage assignment documents to outline exactly how payments will be made.