Estate Planning Attorney in Indianapolis, Indiana
What is the difference between a mortgage and a promissory note?
What is the difference between a mortgage and a promissory note?
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Mortgage and promisory notes are very often executed together. And so in a seller financing situation, that’s
essentially when an individual steps in the place of a bank or whoever is selling whatever is being sold steps into the place of a bank. And the
promisory note is what really outlines the terms in terms of the payments, what those will look like, and what happens with default. It includes the interest
rate and creates that personal obligation to whoever that seller is.
The mortgage is what gives the security interest on the asset that’s being sold so that if something were to um not properly be followed through on and
payments would be missed, then there’s the ability for the seller to go after that asset so that they can get their value back.
Indianapolis, IN estates & probate attorney Madison Cibulka talks about the difference between a mortgage and a promissory note. She explains that mortgage and promissory notes are often executed together, particularly in seller-financing arrangements where the seller essentially takes the place of a bank. She notes that the promissory note outlines the payment terms, interest rate, and consequences of default, creating a personal obligation to the seller. According to her, the mortgage provides a security interest in the asset being sold, allowing the seller to pursue the asset and recover its value if the buyer fails to meet the agreed-upon obligations.
