The mortgage is the instrument that secures the loan. In California, deed of trusts are commonly used instead of mortgages. Although the documents are similar, some distinctions exist.
How to Write a Mortgage Contract by Sabah Karimi - Updated September 26, The mortgage contract is a legally binding document between a borrower and lender that identifies what the mortgage is for, how the proceeds will be used and what rights the borrower and lender have. Lenders and real estate brokers typically draft this mortgage contract during the property sale process and can modify certain sections as they apply to their firm's or business's policies.
Begin the document with the official title, "Loan Agreement" and the current date. Then state who the loan agreement is between; list the borrowers' first with their middle and last names, followed by the lender.
Indicate each party with the designation "Borrower" and "Lender" after each name. This section lists all of the defined terms used in the mortgage contract.
Here you will specify what real estate terms and lender terminology mean, such as: These terms will vary significantly by lender and whether the mortgage contract is for a residential or commercial property.
List each term and its definition in alphabetical order. Borrower's Representations, Warranties and Covenants. This section will list all borrower's rights under this mortgage contract, as well as any warranties that will be included as part of the agreement.
Examples of sections here would include: General Conditions of Loan. This section will list exactly what type of loan documents are being drafted and what types of title policy, survey, lender's inspection and insurance information are included as part of the agreement.
List each component as a subhead to keep everything organized. Further Covenants of Borrowers. All financial information related to mortgage taxes, liens, accounting and leasing policies will be listed in this section.
This section may also include information about litigation and auditing and inspection policies for commercial properties. This section identifies the key parties involved in the mortgage, the use of the loan proceeds and any rules or regulations regarding the partial release of the loan.
This section lists all insurance coverage, casualty and condemnation clauses.
This section is a list of policies and legal rights the lender has in the event of a default. Most banks and financial institutions have a boilerplate statement of this policy, which can be inserted here.
Define the Miscellaneous section. This final section will include information about transfers, waivers, notice policies and rights to a written agreement.
Every lender will have their own set of clauses to list here, depending on the type of transaction and property.A mortgage note is a mortgage in which the person receiving the payments is an individual, or private entity, rather than a traditional bank.
The note acts as a lien against the property, which serves as collateral for the payment described in the note.
While the mortgage deed or contract itself hypothecates or imposes a lien on the title to real property as security for a loan, the mortgage note states the amount of debt and the rate of interest, and obligates the borrower, who signs the note, personally responsible for repayment.
Mortgage Glossary - Note Rate. compare real-time rates. The information sent in this form is secure. Purchase Price.
Loan Amount The interest rate stated on a mortgage note. Also called nominal rate or face interest rate. Non-Judicial Foreclosure. Notary Fee. Note.
Note Rate. Notice of Acceleration. Using a Promissory Note to Purchase a Home Promissory Notes and Bank Loans The promissory note or promissory letter is a binding legal instrument that acts .
The note includes the: name(s) of the borrower; property address; interest rate (fixed or adjustable) late charge amount; amount of the loan, and; term (number of years). Unlike a mortgage or deed of trust, the promissory note is not recorded in the county land records.
The lender holds the promissory note while the loan is outstanding. A Mortgage Agreement puts a lien on the property and provides security to lenders. Note: Depending on your circumstances you may need a Deed of Trust instead.
For help in determining which deed you need, review the help article Mortgage vs. Deed of Trust.