Note (Promissory Note)
A written promise to repay a loan — the legal document that evidences the debt in real estate financing.
Definition
A promissory note (commonly just 'the note') is a written document in which a borrower promises to repay a specified amount to a lender under defined terms — including the interest rate, repayment schedule, and maturity date. Together with the mortgage or deed of trust, it forms the basis of real estate lending.
Notes can be bought and sold. Note investing is a real estate strategy where investors purchase performing or non-performing mortgage notes at a discount, then either collect payments, modify the loan with the borrower, or foreclose and take the property. This allows real estate exposure without owning physical property.
Seller financing involves the seller 'holding the note' — essentially acting as the bank. The buyer makes payments directly to the seller according to the note's terms. The note is secured by a mortgage or deed of trust recorded against the property.
Related Terms
Seller Financing
A transaction where the seller extends credit to the buyer, eliminating the need for a traditional bank loan.
Owner Financing
A transaction where the seller acts as the lender — providing financing directly to the buyer.
Mortgage
A loan used to purchase real property, secured by the property itself as collateral.
Deed
A legal document that transfers ownership of real property from one party to another.