WHAT IS A PROMISSORY NOTE?
WHAT IS A PROMISSORY NOTE?
A promissory note is a promise to pay the loan that is signed by the borrower in favor of the lender. The promissory note is secured by the deed of trust and is the evidence of the debt. The note explains the terms of the loan, including the interest rate and any payment obligations.
Normally, the promissory note is not recorded in public records. The lender retains the note for the length of time it takes to repay the loan. Once the loan has been repaid, the promissory note is then marked “paid in full” and given back to the borrower with a recorded Reconveyance Deed, which is simply a returned deed.
It is important for you, as the borrower, to read both documents carefully, including those portions which were printed beforehand. A better idea still is to request that the closer send you copies of blank promissory notes and deeds of trust in advance for you to review, so you are better acquainted with them before the “real” ones arrive.
Since everyone makes mistakes, including preparers, you should take the time to examine these documents. Keep in mind the following items as you are reviewing each:
• Spelling of names
• Principal balance of the loan
• Interest rate (and the rider, if adjustable)
• Payment amount
• Prepayment penalties, if any
• Address of property
