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In exchange for a deed of trust, the borrower gives the lender one or more promissory notes. A promissory note is a document that states a promise to pay the debt and is signed by the borrower. It contains the terms of the home loan including information such as the interest rate and other obligations.
You can use a template or create a promissory note online. But before you begin, you'll need to gather some information and make decisions about the way the loan will be structured. First, you'll need the names and addresses of both the lender (or "payee") and the borrower.
Typically, promissory notes are securities. They must be registered with the SEC, a state securities regulator, or be exempt from registration.
Deed of Trust (DOT): A deed of trust involves three parties: a lender, a borrower, and a trustee. The lender gives the borrower money. In exchange, the borrower gives the lender one or more promissory notes. The real estate serves as the security for the promissory notes.
The deed of trust is what secures the promissory note. The promissory note includes the interest rate, the payment amounts and terms, and the buyer's promise to pay the lender the amount borrowed plus interest.
To be legally enforceable, a promissory note must meet multiple legal conditions. Moreover, it must contain both an offer of agreement and an acceptance of agreement. All contracts state the type of services or goods rendered and indicate how much they cost.
A secured promissory note describes the collateral?typically property?that secures the debt or amount borrowed. For example, if the borrower owns property, the lender can use the car as collateral until the debt is repaid. If the borrower doesn't repay the loan, the lender can take possession of the property.
Secured promissory notes By assuring that the property attached to the note is of sufficient value to cover the amount of the loan, the payee thus has a guarantee of being repaid. The property that secures a note is called collateral, which can be either real estate or personal property.