What Is the Difference Between Mortgage & Promissory Note?

Mortgages are paid back to banks and other financial institutions.

Mortgage and promissory notes define debts and payment terms between either two individuals or an individual and a business. The terms are different, including what can happen if someone doesn't pay on time.

Collateral

Promissory notes may use anything of value for collateral, such as vehicles, boats, household goods or involve settlement payouts. Mortgages strictly secure real estate.

Terms

The terms for a mortgage are usually set at either 15 years or 30 years to complete paying on the loan. The terms for a promissory range from six months to 30 years depending on the amount owed.

Payment Options

A financial company offers its customers the ability to pay their mortgages with check, money order, electronic payment or over the phone. Promissory note payers typically pay the note with a check or money order.

Default

Most banks allows a person to be three months past due on a mortgage before foreclosing on the property. The promissory note owner may not allow any past-due payments on the loan and may seek to collect collateral immediately.

Personal

Promissory notes are considered more personal and private since they are for payments being paid to an individual. Mortgages are considered commercial because an individual or company is paying a bank or other financial institution.

References

• "Winning in the Cash Flow Business"; Russ Dalbey; 2003