Nevada Promissory Note When Buying a Home
When you borrow money to buy a home, you will likely come across complex legal jargon that can be confusing. Among those terms is a promissory note that will mostly come up when you want a lender to finance your home purchase.
This explains all about buying a house with a promissory note.
What is a Promissory Note?
A promissory is a legal document where the lender and borrower formally agree on the loan repayment terms. The document obliges the borrower to pay back the loan within a given period, either in installments or lump sums.
Any lender can issue a promissory note from a credit union, a home seller or non-mortgage related bank.
The home buying promissory note should outline the terms of the agreements and other essential details, such as the identities of the lender and the borrowers. Other crucial components of a promissory note are.
- The total loan amount
- The interest rates
- The monthly or annual installments
- The number of payments to be made
- Date and venue for the note issue
- The collateral in case of a secured promissory note
Remember that promissory notes are not the same as contracts. Although both documents are legally binding, a promissory note doesn't explain defaults and breaches.
Promissory Notes and Mortgage
Promissory notes are a part of the numerous financial processes of buying a house. When you think of a note, it may sound like a simple piece of paper that you are issued at closing, but that's not the reality. You may get both a mortgage and a promissory mortgage note intended to ensure that you don't fail to repay the borrowed amount when you are expected to.
A mortgage gives the lender control over your real estate property until you are done paying. The lender may then use the title to the property in question to secure the promissory note. This means that if you don't pay the mortgage on time and the lender decides to foreclose the property, you still have to pay the loan to meet the provisions of the promissory note.
Why Lenders Use Nevada Promissory Note
Lenders use promissory notes when financing borrowers' home purchases to ensure a legal recourse if the borrower fails to repay the loan. Perhaps you think paying off a mortgage loan is all you need to own a home. But in reality, the lender holds the promissory note until you are done with mortgage repayment, failure to which they have the power to foreclose the property.
Without a promissory note, lenders may not have legal recourse to foreclose on your home to get their money back. There wasn't any promise made that you would repay the funds within a given time.
Can You Be Assigned Promissory Note in Nevada Without Mortgage?
You can get a promissory note without a mortgage in cases where you opt for other financing methods for your home. Not everyone qualifies for a traditional home loan. You may get a take-back mortgage, where the home seller loans your money to buy their home and then you can agree on how you will settle the payments.
The home seller will issue you a promissory note and you must be willing to let them retain a proportional share of equity in the property until you clear the loan, plus interests. Should you default on payment, the seller has the right to foreclose the property and sell it?
Whether you are a financial institution or a home seller who wishes to lend a loan to a home buyer, a promissory note goes a long way to mitigate risk. Download a free Nevada promissory note template on our website and personalize it to suit your transactions. With this, you don’t need to seek a lawyer to help you create the note.