Closing: The Promissory Note

Real Estate Agent with America's Network Realty Group, Inc

Closing: The Promissory Note

 Many, many documents to sign at closing, one of the most significant is the Promissory Note.  The name in itself is pretty explanatory: borrower’s personal obligation to repay the loan.  The Note contains all the pertinent facts of the loan. The loan amount, the interest rate, monthly principal and interest payment, first payment due date, maturity date, borrower’s right to prepay, and late payments.

Loan Amount This amount should be the same amount of the loan that appears on the HUD Settlement Statement.

Interest Rate   An explanation of the interest rate indicating if it is fixed or adjustable.  If the interest rate is adjustable the formula for calculating the rate for each adjustment, what index the adjustment is based on, the interest points above that index, and the cap on the loan.

Monthly Principal and Interest Payment   showing the amount of principal being borrowed and the interest to be paid by the borrower.  It does not include the amount for taxes, hazard insurance or mortgage insurance.

First Payment Due Date for the Borrower  Normally at closing the borrower pays prepaid interest (listed on the HUD Settlement Statement).  Thus the borrower’s first payment is due on the first day of the second full month following closing.  If no prepaid interest was paid by the borrower the first payment will be due one month from the closing date.

Maturity Date The date the loan will be paid off. 

Borrower’s Right to Prepay  This paragraph will state whether or not the borrower will be penalized for paying the loan off early.  If the Note does not indicate there is a penalty, there could be a rider attached indicating the terms of a prepayment penalty.  In Georgia if there is no paragraph in the note, or rider attached providing for a prepayment penalty, then the borrower can prepay the loan in whole or part any time prior to the maturity date of the loan.

Late Payments This paragraph states the grace period (if there is one) and the terms of the penalties if the monthly payment is made late.  These penalties will depend on the type of loan.


Posted by

Susan Jackson, Associate Broker

Americas Network Realty Group, Inc

1532 Dunwoody Village Parkway

Atlanta, Georgia 30338

Office: 770-551-5850     Direct: 770-551-5852   Fax: 770-551-5866



Americas Network Realty Group, Inc

Comments (8)

Team Honeycutt
Allen Tate - Concord, NC

Good information on The Promissory Note. Thanks  for sharing the helpful tips.


Feb 08, 2013 06:36 AM
Susan Jackson
America's Network Realty Group, Inc - Sandy Springs, GA

Hi Betty, Thanks for stopping by.

Feb 08, 2013 09:02 AM
Gary Frimann, CRS, GRI
Eagle Ridge Realty / Signature Homes & Estates - Gilroy, CA
REALTOR and Broker
That covers it all. In CA we are a deed state so our buyers generally sign a deed of trust as well. But, you've got it all covered!
Feb 08, 2013 12:30 PM
Les & Sarah Oswald
Realty One Group - Eastvale, CA
Broker, Realtor and Investor

Susan - well explained blog about promissory note which is basically a negotiable instrument used by lender to explains the terms of the loan. Two of the main documents that buyer's sign during escrow closing are promissory note and the deed of trust (the transfer of title from trustor to trustee until the loan is paid off).

Feb 08, 2013 04:56 PM
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

I will add to this worthy post that in a legal dispute, the note is examined thoroughly. Put anything in it that one wishes to be part of the transaction. The note governs everything in a dispute..good post

Feb 08, 2013 10:38 PM
Michael Setunsky
Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

Susan, good explanation and detailing what is included in the Promissory Note at closing.

Feb 08, 2013 10:40 PM
Susan Jackson
America's Network Realty Group, Inc - Sandy Springs, GA

Hi Gary, Here in Georgia a Security Deed is used.  We are a non-judical state. Thanks for stopping by.

Sarah and Lee  My inspiration for the post was a buyer, who wanted information on the closing procedures




Feb 08, 2013 11:14 PM
Susan Jackson
America's Network Realty Group, Inc - Sandy Springs, GA

Richie, Thank you for the additional information.

Michael, Appreciate your comment.  thanks for stopping by.

Feb 08, 2013 11:15 PM