You may hear your lender ask about the Note, or if you reviewed the Note. The Note, in this sense, is not a musical score, or something written on a post-it; it is the Promissory Note entered into between the lender and the borrower. It provides that the lender will lend a certain sum to the borrower in exchange for the borrower’s promise to pay the lender over time at a certain amount of interest.

Example: A lender may lend $200,000 to the borrower to be paid on the first of every month over 30 years at an interest rate of 4.25%, which results in a monthly payment of $983.88.

Sometimes, there may be Riders or Addenda that accompany the Note; these will describe additional terms. For instance, if you have an adjustable rate mortgage, there will typically be an addendum which will provide the details of the loan. A 5/1 ARM may read that the loan is to be paid over 30 years, and the rate is fixed at 4% for the first 5 years, thereafter adjusting to the one-year LIBOR index plus a margin of 2.75% (click on /category/adjustable-rate-mortgages/ to learn more about adjustable rate mortgages).

A pre-payment penalty may also appear as an addendum to the Note. For example, if the loan is paid in full in the first 6 months, you would have to pay a penalty equal to 1% of the outstanding loan balance.

You will receive the Note at closing. Make sure you keep this, along with any addenda, as this contains the terms of your debt.

If you have a Note, but are having trouble understanding it, contact us and we can help!

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