When you’re trying to invest in real estate, it’s important for you to understand notes and mortgages. Most people believe you have to go to a bank in order to get a mortgage. In actuality, individuals contact a bank to obtain a loan. Once the bank approves them for a loan, they’ll have to sign a promissory note to the lender which secures their promise to pay. They also give the mortgage as security for repayment of the note. The mortgage is a security agreement in which the borrower offers the property as collateral for payment. The mortgage document is recorded the in the property records, establishing a lien on the property in favor of the lender.
Once the promissory note is paid off, the lender is required to relinquish the collateral. This release is done by signing a release of mortgage, which is recorded in the county records.
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