What Is a Mortgage Note?

When a lender agrees to give money to a borrower to purchase property, the lender and borrower agree on a plan for repaying the borrowed money. The plan is recorded as a mortgage note, a written document that specifies deadlines and payment amounts agreed upon by both parties.

Mortgage notes give lenders security during the lending process, as without the note, borrowers would not be legally bound to repay the loan. Once the note has been signed by both parties, it is legally binding and gives the lender the ability to take legal action if the borrower defaults on the loan.

Mortgage notes give the lender control of the property until the loan has been repaid in full.

Mortgage notes document the terms of the mortgage, which means they are determined by the type of loan the borrower is taking out. As the loan types differ from each other, so do the terms stipulated in the note. Below are the most common loan types and how they impact the mortgage note:

Mortgage notes are usually titled as a note, borrower’s note or mortgage note. Document titles will help you differentiate between your mortgage note and other loan forms, such as the closing disclosure or loan estimate.

According to the Consumer Finance Protection Bureau, mortgage notes include the amount you owe, the interest rate, the payment due dates, the length of time for repayment and where the payments are to be sent. The note also contains a section outlining any consequences, should the terms of the note be broken.

There are a few ways a borrower can request a copy of their mortgage note.

You can go directly to the servicer. Under the Federal Servicer Act, loan servicers are required to respond to qualified written requests regarding information related to the loan.

Alternately, you can check with the county recorder. Many documents are filed in public record, including mortgages, deeds and other land attachments. A borrower may be able to go directly to the county website and request this information.

Selling a mortgage note is legal and can be done as long as the borrower is notified during the application for the loan. Whether the seller is an institution or private entity, they are legally required to notify the borrower of the change.

A mortgage note is usually sold to a buyer when the seller no longer wants to wait for the payments and needs a lump sum of cash immediately. In this case, the current owner of the mortgage note would sell the note, relinquishing his or her claim to the obligations of the borrower. The only difference to the borrower is where and to whom they send their payments.