Definition

• The mortgage note is the agreement between the borrower and the lender. It states that upon the completion of the specified terms found within the document, the borrower (or their designated appointee) will become the owner of the property. In simple terms, it is the contract between the buyer and the bank which staked the money for the loan.
  
  

Amount

• The mortgage note will detail the amount of the loan. This amount will include the purchase price of the property, less any down payment that the borrower is making on the home or property. The purchase price of the property will also reflect any concessions that the seller made to the buyer in the form of cash after inspections. For instance, if the home needed a new roof, and the seller agreed to lower the price from $300,000 to $285,000, the lower amount, less any down payment, would be written on the mortgage note.
  
  

Interest Rate

• The mortgage note will also detail the interest rate that the lender is charging the borrower. This interest rate, which is usually a compounded interest rate, will inform the buyer of the premium that they are paying to the bank for purchasing the property. A compounded interest rate means that the interest on the debt is not simply calculated on the borrowed amount, but calculated on a daily or monthly basis each year. The interest rate will most likely have the acronym APR or APY after it--annual percentage rate or annual percentage yield. These take into account the addition of points and loan doc fees charged by the bank to the borrower. For instance, if a borrower has a rate of 5 percent on a $100,000 loan, but the loan doc fees add $250, then the APR in the mortgage note would actually read 5.109 APR.
  
  

Term

• The mortgage note will also cover the term of the loan. For instance, if the loan is a 30-year loan at a fixed interest rate, then the mortgage note will detail that the borrower will make 360 payments for a set amount. (This is because there are 360 payments in a 30-year loan.) In another example, if a borrower had an adjustable rate mortgage that changed after five years, the mortgage note would detail the payments of the first five years or 60 months, then set the parameters for the higher interest rate thereafter. Many times adjustable rate mortgages fall within a range depending on the prime lending rate. Therefore the set amount will not be spelled out in detail.
  
  

Responsibility

• Whomever signs the mortgage note to accept the loan is ultimately responsible for it. This means that in the case of default, the bank will seek retribution from the signee of the note. While usually the owner is also the signee of the mortgage note, there are plenty of instances where a parent, spouse or friend will sign a mortgage note for the bank loan, but the property is listed in someone else's name. Think of this responsibility in the same manner as when someone cosigns for a car loan. If the driver defaults, then the bank goes after the cosigner for the money.