Promissory Note

A promissory note is the debt instrument in a real estate transaction - the borrower's unconditional promise to pay. It specifies: principal amount, interest rate, payment amount and schedule, amortization term, balloon date and amount, default definition, cure period, late fees, and prepayment terms. The note is personal to the borrower - it is an obligation regardless of what happens to the property. The deed of trust or mortgage is the security instrument that attaches the note to the specific real estate. In seller-financed deals, the original note is typically held by the seller (the lender), while the borrower retains a copy and the security instrument is recorded publicly.