What Is a Note?

In real estate, a note refers to a promissory note that is secured against a mortgage loan and serves as proof that a borrower owed a lender or a bank money and promises to repay the loan at a certain time and interest rate. It is also known as a borrower’s note or a real estate lien note.

The note bears a borrower’s promise to repay the loan amount at agreed terms and usually explains who the borrower and the lender are, what the specified interest rate is, and what loan terms are agreed on.

It becomes a real estate note with a different function when used as a type of investment product in the open market. If the loan financer, bank, or lender wishes to cash in on the eventual repayment of the loan, they can sell the real estate note. They can market it through brokerage firms, capital financing firms, and other investment listings. Anyone interested can buy the note.

The notes used in this transaction not only include promissory notes, but also deeds of trust or contracts for deeds and land sale contracts. Real estate notes are available for commercial, industrial, and residential properties.

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Each one comes with a particular set of risks and benefits for each style of tenant that holds the real estate note.

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