Difference between a Note and Mortgage

A Levels Academy Islamabad

Transcript

00:00Buying a house, the American dream.

00:03And like most everybody else, it takes a loan to have that part of the American dream.

00:08When you're getting down to the nitty-gritty of the loan process,

00:11you'll be signing a whole lot of papers.

00:14But what are all these parchments you're scribbling on?

00:17Well, each and every one is a legally binding document with legal consequences.

00:22And two of those documents are more important than any of the others,

00:26the note and the mortgage.

00:29The note, which is also called a promissory note,

00:33is really just a fancy I-O-U.

00:36The note says you owe the bank and that you're going to pay them back over time,

00:40while also detailing how much time you have to pay them back

00:43and what the interest rate is.

00:45Not only that, the note will also contain information

00:48on how you and the bank can contact one another.

00:51Now, the mortgage is something a little different.

00:54A mortgage is a lien against your home to guarantee the payment of the note.

00:58It follows the note around like a faithful sidekick.

01:01The mortgage is what gives the bank the right to foreclose on your home

01:04if you do not pay back the note.

01:07Like the note, the mortgage will also consist of additional information,

01:11such as how the bank must notify you regarding nonpayment

01:14and any additional money you may owe the bank for taxes and insurance.

01:18The mortgage is what gets filed or recorded in official county records

01:23so that others can see if a lender has some rights to the value of the house.

01:27Sort of like first dibs on any money that would come from selling the house.

01:32Everything comes to a head, appropriately, at the closing of the contract on the house.

01:37Here, the buyer and seller will meet along with the appropriate bank agents and representatives.

01:42The seller will sign over the deed of the house to the buyers,

01:45and they, in turn, will sign the note and the mortgage along with any other loan papers.

01:50The language in these documents is generally considered non-negotiable from the bank's point of view.

01:55Double-check all the numbers and information.

01:58Have the closing agent explain whatever isn't clear, if need be.

02:02If the terms in the loan papers are different from what you agreed on, do not sign.

02:07In those cases, and because of the fixed nature of the closing documents,

02:12you don't have much choice other than walking away at that moment to re-figure things out.

02:17For help in understanding all of these documents and any other loan issues,

02:21turn to LegalYou.

02:23LegalYou. You can do this.