Legal Definitions - mortgage note

A mortgage note is a written promise by one party (the borrower) to pay money to another party (the lender) or to bearer. It is a legal document that outlines the terms and conditions of a loan for which real property has been offered as security.

• Balloon note: A note that requires small periodic payments but a very large final payment. The periodic payments usually cover only interest, while the final payment (the balloon payment) represents the entire principal.
• Floating-rate note: A note carrying a variable interest rate that is periodically adjusted within a predetermined range, usually every six months, in relation to an index, such as Treasury bill rates.
• Mortgage note: A note evidencing a loan for which real property has been offered as security.
• Nonrecourse note: A note that may be satisfied upon default only by means of the collateral securing the note, not by the debtor's other assets.
• Recourse note: A note that may be satisfied upon default by pursuing the debtor's other assets in addition to the collateral securing the note.

These examples illustrate the different types of mortgage notes that exist and the various terms and conditions that can be included in them. For example, a balloon note may be suitable for a borrower who expects to have a large sum of money available at the end of the loan term, while a floating-rate note may be more appropriate for a borrower who wants to take advantage of changing interest rates. Nonrecourse notes may be preferred by borrowers who want to limit their liability in case of default, while recourse notes may be preferred by lenders who want to have more options for recovering their money.