What is a mortgage note?

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    Jordan Moore
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    Team StellarFi
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    A mortgage note is a document you sign when you close the deal on your home. It contains the terms of the agreement between the lender and the borrower. It is a security instrument that mortgage lenders sell in the secondary market — usually to real estate investors because they get passive income through these notes.

    A mortgage note typically includes the following information:

    • Total Loan Amount: The overall sum of the home loan.
    • Down Payment: The initial amount paid by the borrower.
    • Payment Frequency: Specifies how often payments are due.
    • Loan Type: Indicates whether it’s a fixed- or adjustable-rate mortgage.
    • Prepayment Penalty: Specifies whether there’s a penalty for early repayment.

    The mortgage note also comes with a promissory note which outlines the terms of repayment to the lending institution. It provides loan repayment details like interest rate and payment method. Mortgage notes are relatively low-risk because investors lose money only if the borrower defaults or prepays their mortgage to avoid interest.

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StellarFinance, Inc. and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

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