Closing on a mortgage loan isn’t any quick matter. The method often takes a number of hours on closing day and requires reviewing and signing dozens of documents and forms.
Probably the most essential on this pile? That’d be your mortgage note. The mortgage note is a critical (and legal) document that outlines the important thing details of your loan — and what exactly you’re agreeing to as a borrower.
Are you preparing to take out a mortgage loan? Here’s what to find out about your mortgage note and what it means for you in the long term.
This embedded content just isn’t available in your region.
In this text:
A mortgage note is a legal document detailing the terms of your mortgage loan. It includes information reminiscent of your loan amount, the rate of interest, the due dates of your monthly payments, and some other conditions set by your mortgage lender that you could adhere to.
You’ll review these details and sign the document at the tip of the closing process, solidifying your agreement to the terms and your commitment to repay the loan. Your lender may also sign the note and hold onto it until you fully repay the loan.
A mortgage note is a multi-page legal document that comprises key information regarding your mortgage agreement.
It is going to typically contain sections on:
-
Your promise to repay the loan
-
Interest, including the rate of interest and any rate of interest changes you may expect (if you will have an adjustable-rate mortgage)
-
Monthly mortgage payments, including the due date of payments, the payment amount, and the maturity date of the loan
-
Your right to repay the loan early
-
Any additional loan charges or late fees you might face
-
Courses of motion when you fail to make payments
-
Required legal notices
For more information, see the .
You’ll sign your mortgage note at closing, however the note doesn’t stop being essential when you’ve received the keys to your latest home. It is going to also come into play at various points in your homeownership tenure, and depending on the way you go about repayment, it could even find yourself back in your hands by the tip of it.
Listed below are a number of situations through which your mortgage note may come up:
It’s pretty common for mortgage notes to alter hands when you sign your closing papers. Many lenders sell their loans on the secondary market, allowing them to unlock money to loan to latest borrowers. When this happens, your mortgage note can be sold and transferred to a different loan servicer. You’ll then proceed making payments as agreed upon within the note, simply to the brand new servicer as a substitute of your old one.
In case your mortgage note is sold, it is best to receive a notice well ahead of time telling you when and where to send your latest payments.
In the event you default in your mortgage — meaning you stop making payments on it — the lender or servicer will use the mortgage note to indicate that you simply’ve failed to satisfy the agreed-upon terms and will move to foreclose on your own home. This could mean losing your property.
Whenever you repay your mortgage in full, your lender provides you with possession of the mortgage note, with a notation that the loan balance has been paid off and all terms of the agreement have been fulfilled.
In the event you refinance your mortgage, you’re technically paying off one loan and taking out one other one. When this happens, your old note is closed, and a latest note is created detailing the brand new loan’s terms. Your mortgage lender or servicer holds this latest note until you repay the loan balance.
People often confuse mortgage notes with other legal documents, like deeds and promissory notes. While these share some similarities, there are key differences to take into accout.
A mortgage note is just the document that outlines the mortgage loan terms, serving because the legally binding agreement between you (the borrower) and your lender. Mortgage notes are a form of promissory note (only one specific to mortgages); there are also promissory notes in automotive buying (auto loans) and other situations that involve borrowing money.
Alternatively, a deed is a separate legal document that offers you the proper to own your property. A deed of trust shows your own home will function collateral for the loan in query. It states that when you fail to repay the loan, the mortgage lender can seize and sell the home to make up for its losses. A deed of trust is comparable to a mortgage agreement, and which one you employ will depend upon your state of residence.
A note is a document that outlines the terms of your mortgage loan, including the rate of interest, payment, term, and other details. It legally binds you to the terms and requires you to repay the loan.
You sign your mortgage note at closing, so a duplicate ought to be included in your closing papers. In the event you can’t find yours, it is best to give you the chance to ask your mortgage lender or servicer for a duplicate, or you may contact your local records department.
Lenders may sell mortgage notes — the legal documents binding borrowers to their mortgage terms — on the secondary market to unlock funds for brand spanking new loans. If this happens to your mortgage note, it’s going to alter where it’s essential send your monthly payments but not any of the terms of your loan. You need to receive a notice of this alteration ahead of time.
A signed mortgage note holds each the borrower and the lender accountable in a mortgage agreement, so it’s a essential a part of any home loan. Some lenders may simply call this a “promissory note,” though it serves the identical purpose.