What is a promissory note?

A promissory note (also known as a mortgage note or a note) is one of the 2 instruments used in a mortgage loan

(The mortgage is the other instrument used in a mortgage loan)

A note must accompany all mortgages in Florida and is evidence of the borrower’s personal promise to repay the loan that has been advanced by the lender

The note forms the contract between the borrower and the lender for the loan and contains:

  • the full name of the borrower and the lender
  • the amount of the loan
  • the interest rate
  • the loan repayment terms

The note contains no security to the lender other than the borrower’s promise to pay

What is lien theory?

Lien theory is the system of real estate finance used in most states where the title to the property remains with the borrower for the duration of the loan

The lender creates a lien against the property by recording a mortgage

Florida is a lien theory state

What is title theory?

Title theory is the system of real estate finance used in some states where the title to the property is temporarily conveyed to the lender for the duration of the loan

When the loan is repaid, title is conveyed from the lender to the borrower

Florida does not use title theory, but observes lien theory

What is a lien?

A lien is a legal interest of a creditor or government agency in property owned by another

The lien gives security to the creditor or government agency that their debt will be satisfied

If the property owner (the debtor) does not pay his debt then the lien holder has the right to force a sale of the property with the proceeds being used to satisfy the outstanding debt

A lien is an encumbrance on the title of real property

Liens are usually recorded with the clerk of the circuit court in the county where the real property is located

A mortgage is a very common type of lien on real property