The lender holds onto the promissory note while you pay off your mortgage, but you can request a copy. Once you've made the final payment, the company will mark your original note as paid and return it to you. You'll sign two legal documents when you borrow money to buy a home: a promissory note and aWhat's the difference? A promissory note explains the terms of borrowing money, and by signing it, you're agreeing to those terms.
A mortgage is a legal agreement about what happens should you fail to pay back your mortgage according to the terms spelled out in the promissory note. The mortgage will likely state that your home will be foreclosed upon if you continuously default on payments. Anyone can find your signed mortgage in the public records. Although a promissory note is legally binding, it isn't publicly recorded.Here's what you can expect to find in a promissory note:Principal, or the amount you borrow for your mortgage. If you borrow $200,000 to buy your home, your principal is $200,000.
Interest rate, or the fee the lender charges for lending you money. Interest will be expressed as a percentage, such as 2.85% or 3.5%.Due date of the last mortgage payment. If you have a traditional mortgage that requires you to pay back your mortgage in equal monthly installments, this date will be the day of your final monthly payment.
Laura Grace Tarpley is the associate editor of banking and mortgages at Personal Finance Insider, covering mortgages, refinancing, bank accounts, and bank reviews.