What’s The Difference Between A Mortgage And A Promissory Note

Simply put, a mortgage is a lien on your home, it’s placed on the property by a lender when you borrow money to buy your home. A promissory note (mortgage note) is a written agreement containing the details of the mortgage loan.

You are referred to as the Mortgagor because you give your home to the lender as collateral. The lender is called the Mortgagee as they are receiving your home as collateral. This “securitizes” the lender against your default on the loan.

In other words, the Mortgagee can take the house if you stop making the loan payments. The mortgage note lays out the conditions of the agreement, like maintenance of the property, payment of real estate taxes and property insurance. Also, you can’t transfer ownership of the property without paying off the lien.

Many times, people confuse the mortgage with the note. The note further lays out the terms of repayment and when the lien will be released. The note identifies the interest rate, how many payments you need to make, (term) and the actual monthly loan payment, as well as any other conditions which you, the mortgagor has agreed to, like prepayment penalties’ rate adjustments, or balloon payments, etc. So that’s the difference between a mortgage and a note.