What You Need to Know about Mortgage Notes

If you’re new to the world of real estate finance, terms such as “mortgage notes,” “promissory notes” or “mortgage buyers” might be confusing. The good news is, it doesn’t have to be. Read on to discover the basics of mortgage notes.


A mortgage is simply the name of the loan you take out in order to buy a house or other real estate property. People usually take out mortgages from banks or other financial institutions. When you take out a mortgage, the home you are buying becomes collateral for the loan. As long as you make your payments to your lender and adhere to the terms of the mortgage (more on that in a minute), you maintain custody of that property or in other words, live in the home.

Promissory Notes

A promissory note is the legally binding document detailing the terms of the mortgage, whereas the mortgage is the loan itself. When a promissory note is signed for a mortgage, the resulting document is often referred to as a mortgage note, though sometimes it’s also referred to as either a borrower’s note or a real estate lien note.


The mortgage note details specifics such as the names of the borrower and the lender, the address of the property involved and the conditions of the loan and its repayment. Legal jargon is used such as:

  • Obligor. Also called the promisor, this is the person paying back the loan.
  • Obligee. Also called the promisee, this is the entity authorized to collect payment for the loan.
  • Consideration. This refers to something of value given in exchange for the real estate, usually money.

When signing a mortgage note, the borrow also agrees to certain terms such as maintaining the property and keeping an insurance policy on it. Generally, the property must be used as a residence and not, say, as a dump.

Repayment is broken down into percentages for principal and interest, where an agreed-upon amount is paid over a particular length of time on a specific date each month.


It’s extremely important to read through and thoroughly understand the terms of a mortgage note before signing it. There may be penalties for late payments as well as prepayment penalties. The best way to be happy with your mortgage is to understand the terms you’re agreeing to. However, if you do currently have a mortgage you’re unhappy with, you may be able to sell it to a mortgage buyer.