While most know that a promissory note and a mortgage are the two essential documents of a real estate loan, some don’t know the differences between them.  The note is evidence of indebtedness and a promise to repay the loan.  The mortgage is a pledge of security for the debt, usually specific realty.  If a borrower fails to meet its obligations to pay back the loan under the promissory note, the lender may exercise its remedies established in the mortgage to foreclose on the property that is the subject of the mortgage.

Be sure to understand the specific terms of the note, such as the loan amount, interest rate, maturity date, and repayment and prepayment provisions.  Additional noteworthy clauses in the note or mortgage include: due on sale, prohibition against junior financing, option to call or recast, and default.

– Spencer R. Munns, Esq., is a shareholder with the law firm of Bogin, Munns, & Munns, P.A., a full service law firm with offices in Orlando, Clermont, Kissimmee, Deltona, Daytona Beach, Ocala, Melbourne, Gainesville, and Leesburg, Florida.  He welcomes questions and comments regarding the above and can be reached at smunns@boginmunns.com.

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