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CHAPTER TWO

CHAPTER TWO. FINANCING: NOTES AND MORTGAGES. The Mortgage Instrument. A mortgage is created when one party pledge s real property to another party as security (collateral) Mortgagor and Mortgagee A Promissory Note is normally issued together with the mortgage Obligation to pay.

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CHAPTER TWO

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  1. 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

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