Hypothecation: The Promissory Note and the Mortgage

If you are looking for a way to secure a hypothecation mortgage, then you should consider including a promissory note into the agreement. The promissory note forms the basis of the loan agreement, a document stating when and how the mortgage will be rearranged. Once this note is signed, the hypothecation mortgage can proceed.

The Promissory Note

This note is binding, and serves as a legal document. The promissory note gives a detailed account of the amount of the loan, the rate of interest being charged, and any other conditions which have been placed upon the mortgage. Notes about the type of hypothecation mortgage on offer could go here. The borrower will then sign the promissory note, which shows that they have promised to repay the mortgage by a certain date.

The Mortgage

Typically, although the promissory note details the aspects of the loan, it is the mortgage itself which secures the property for the lender, and any other actions, such as handing over the deeds to the lender, are separate from the note. The note itself only recognizes that the borrower is liable for the loan, and if there is any foreclosure of the mortgage, then the lender will need to produce the note as evidence that they have ownership of the debt.

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