Loan Documents | Different Note Types
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While all notes function with the same end in mind, there are different types of notes that can be obtained. The following is a list of notes:
- The Promissory Note – This is a common note, and as the name suggests, it is the borrower’s written promise that they will pay a specified amount of money, installments of money, or money on demand to a named person, in the future, at any given time.
- The Amortized Note – the amortized note is often used for real estate transactions. It requires that the borrower usually make regular monthly payments of interest and principal throughout the period of the loan.
- A Holder in Due Course Note – This particular note is in reference to an individual who is the innocent buyer of the note for value, and was oblivious to any defects that existed within the note when purchased. The holder of this not is protected by the law, as they are considered to be in good faith holding this negotiable note.
- The Straight-Interest-Only Note – The straight-interest-only note, is one that does not require payments of principal during the life of the loan. The interest payments are considered negotiable, but generally they occur as monthly payments.
- Recourse Note – For this note, the endorser is making a guarantee that the payments will be given to the present holder, as well as all the other holders. That being said, a person may choose to recourse a note so that the payment goes to one individual in particular and no one else. As an endorser, one should be cautious when using this note, because the payment liability is extensive.
- Note Without Recourse – If this note is written above the signature it implies that future holders will not be guaranteed payments.
- The Demand Note – This note is used only on special occasions and is subject to be called in at any time for full payment.
- An “or more” Note – some notes feature an “or more” clause that is located near the payment amount. This “or more” clause enables the borrower to rightfully increase their monthly payments when they choose, as well as the right to fully pay off the loan without being subject to penalty. However, if both parties involved in the loan agree, the “or more” clause can be deleted by simply having an escrow agent omit the objection.
Related posts:
- Loan Documents I
- Collection and Distribution of Loan Payments
- Liens Facts
- Deed Of Trust | Third Party Benefits
- Trust Deeds | Loan Servicing
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