Promissory Note
A written promise to repay a loan under specified terms — the borrower's personal financial obligation in a real estate transaction.
Full Definition
A promissory note (also called a mortgage note) is a legal document in which the borrower (maker) promises to repay the loan to the lender (payee) according to specified terms, including the loan amount, interest rate, payment schedule, and maturity date. The promissory note is the borrower's personal promise to pay — it creates the debt obligation. The deed of trust or mortgage is the security instrument that pledges the property as collateral. If the borrower defaults, the lender can pursue both foreclosure (through the security instrument) and a deficiency judgment (through the promissory note) to recover any remaining balance after the sale.
Real-World Example
When closing on a $350,000 mortgage, the borrower signs a promissory note promising to repay the loan at 6.75% over 30 years, and separately signs a deed of trust pledging the property as collateral.
How Promissory Note Appears on the Real Estate Exam
Common question types, tested concepts, and what to watch out for
The promissory note = the debt (personal obligation). The mortgage/deed of trust = the security (lien on property). Both are signed at closing. The note makes the borrower personally liable; the security instrument pledges the property.
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