1. FINANCING: NOTES AND MORTGAGES
CHAPTER TWO
FINANCING: NOTES AND MORTGAGES

2. The Mortgage Instrument
A mortgage is created when one party pledges real property to another party as security (collateral)
Mortgagor and Mortgagee
A Promissory Note is normally issued together with the mortgage
Obligation to pay

3. Essential Elements of Mortgage Note
A mortgage note is a debt contract document
Amount borrowed
Rate of interest
fixed vs. adjustable
Payment amount, due date, and term (number of payments)
Maturity date
Order of payment application
Late charge/fees/penalties; interest; principal
Reference to the real estate (mortgage)

4. Essential Elements of Mortgage Note
Default and foreclosure
Penalties for late payment and forbearance provisions (grace period)
Prepayment Provisions
Residential vs. commercial mortgages
Acceleration Clause
Recourse vs. Non- Recourse loan
Assumability
Alienation/“Due on Sale” Clause
Assignment Clause (transfer to 3rd party)

5. Mortgage Clauses Future Advances Release of Lien
Escrow/trust account for
Property Taxes
Property Insurance
Mortgage insurance premium
Maintenance
Subordination
Senior vs. junior mortgage
Seller financing