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A note is a promise to pay a debt, as opposed to a mortgage, which is a pledge of real estate as collateral to secure the promise.

A note is a complete contract in and of itself. It's terms state the amount of money being borrowed, along with the conditions under which it will be repaid, such as interest rate, time periods, etc. Once it is signed by the borrower, it becomes a legally enforceable instrument without any additional signatures, once it is in the possession of its bearer.

If the terms of the note are broken, the note holder (lender) can either sue on the note or if it is a note and a mortgage (pleding property as collateral), the note holder may foreclose on the property.

When a note doesn't have any collatteral, it is referred to as an unsecured note. An example of this might be a personal loan from a bank.

Real estate loans are almost always secured by a mrotgage or deed of trust on real property. The note is almost always attached to the mortgage.

A note usually includes the following:

  • Date Signed
  • Identities of Participants
  • Promise to Pay
  • Payment Due Dates
  • Amount and Terms
  • Reference to Security
  • Signatures and Endorsements
  • Cosigners

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