Loan Documents

Promissory Note vs Deed of Trust vs Mortgage?

When you hear about real estate loans, you can tend to hear a few terms that seem to mean the same thing but actually are different.  Two documents are more similar – deed of trust and mortgage – while the promissory note is a different type of document.

The promissory note, or sometimes just referred to as “note”, is the actual loan agreement between the lender and borrower.  This document has all the specifics of the loan, such as the loan amount, interest rate, loan payments, and repayment timing.  As well, there are other legal terms within the note that stipulates the borrower and lender obligations.

On the other hand, the deed of trust or mortgage is the security instrument that gets recorded against the property’s title.  Because these documents are recorded, the information becomes public to anyone who is researching title on a property.  And for that reason, the lender and borrower typically wish that most of the loan information remains private.  The deed of trust or mortgage will usually include the loan amount but not any of the terms included in the promissory note.

And what is the difference between a deed of trust and a mortgage?  The mortgage will typically have just two parties – lender and borrower – while the deed of trust includes a third-party trustee.  It seems here in California that a deed of trust is more common, while a mortgage might be more common in other states.

As always, please feel free to share your comments and questions with us below.

John Kaye has over 30 years experience within the land development and homebuilding industries, having held senior management positions with The Irvine Company, Koll Real Estate Group, and Brookfield Homes. As a developer, John has overseen the land acquisition, entitlements, and development of master planned communities, residential tracts, urban infill sites, and land assemblages. His experience and skill sets include land acquisition, land brokerage, project management, market analysis, finance, and strategic planning.

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