What Is A Promissory Note In Real Estate

A promissory note is an unconditional written and signed promise to pay a specific sum of money which can include interest on demand or on a specific date.

Promissory notes are not as formal as loans and not as informal as ious. Definition of promissory note a promise in writing to repay by a specified period of time a specified amount of money. In the context of real estate financing a promissory note is secured by a mortgage or deed of trust that is recorded against the property. A promissory note is a promise to pay back a loan at a future date.

Marcus a shareholder in becker poliakoff s real estate practice group in. Terms of the promissory note interest due date principal signatures etc are worked out between the lender and borrower. Oversimplifying a promissory note is a written promise to repay a debt. In the most basic terms it s a legal document you sign containing a written promise to pay a lender says scott a.

A promissory note is a financial instrument that contains a written promise by one party the note s issuer or maker to pay another party the note s payee a definite sum of money either on. Explaining promissory note term for dummies. And if you hold these debt obligations in an ira you get the benefit of favorable tax treatment as well. Real estate promissory note a real estate promissory note is similar to a commercial note as it often stipulates that a lien can be placed on the borrower s home or other property if he defaults.

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It identifies the contractual obligations of the borrower promisor towards the lender promisee in terms of the loan such as the amount and timing of repayment and the lender s recourse if the loan is not paid on the due date. Promissory notes including trust deeds and mortgage notes are an appealing asset type for many investors because of their potential for positive cash flow and above average yields. If the borrower does default on a real estate loan the information can become public record. The promise to pay is now secured by the real estate which serves as security collateral.