Safeguarding Your Mortgage Note
The mortgage note is also a promissory note, which is a promise to pay or IOU from the property buyer. It spells out the amount due and terms of repayment. In legal jargon it is known as a negotiable instrument. Similar to a check, the original must be presented to collect or prove ownership. The original mortgage note is an important legal document that should be kept in a safe place, and here is why safeguarding your mortgage note is important!
Keep Your Original Mortgage Note Safe
It may seem like a simple matter, but safekeeping a Mortgage Note in a safe place is, sometimes, easier said than done.
A Mortgage Note, or Promissory Note, is an agreement where you agree to finance all or a part of a buyer’s purchase of a property you own. The interest earned on the mortgage note can be better than what banks offer or the stock market is providing. That makes self-financed mortgages a valuable investment tool for many people.
Due to the value and importance of the documents evidencing the agreement terms and conditions, it is critical to retain all the documents safely and securely.
Note Safety: Loan-To-Value Ratio
What Is the Loan-to-Value (LTV) Ratio?
The loan-to-value (LTV) ratio is an assessment of lending risk that financial institutions and other lenders examine before approving a mortgage. A low loan-to-value ratio makes your note safer and increases its resale value. The loan-to-value ratio for your note is the sum of the current loan balance for your loan and all senior loans divided by the current market value of the property securing the note.
Storage of Mortgage Note
Mortgage notes are negotiable, transferable documents. Safeguarding this document is extremely important. Many times the attorney that handled the property closing for you will keep these documents in their files and provide you with a copy. This can be satisfactory if you are going to maintain an ongoing relationship with that attorney. If not, or if you prefer to keep them yourself, store them in a safe, fireproof box or in a safe deposit box at your bank. Be sure to keep copies of the originals at home for your records.
After being recorded at the county recorder’s office, the original mortgage or deed of trust will be returned to you. It is a good idea to keep this original document with the original promissory note.
Whatever method you choose, be sure to keep the original mortgage note in a safe place that is easily located!