Deed vs. Note

by Fraser Sherman

Buying a house involves lots of paperwork. When you take out a mortgage, two of the key papers are your promissory note and your deed. The note is a declaration that you owe your lender whatever the amount of your loan is. The deed is what gives you ownership.

Deed of Title

The deed is the legal document that proves you own the house. When you close, the grantor -- the seller -- writes a deed transferring title to you as the grantee, or buyer. Every deed includes the legal description of the property, the name of the grantor, the name of the grantee, and the grantor's signature. Every deed has to be notarized. Specific state laws may also require special conditions, such as witnesses' signatures or the grantee's signature.

The Note

The promissory note is the IOU for your loan. It gives your name, the house address, and the amount you're borrowing to buy the property. It also states the interest rate on the loan and the number of years you have to pay off the note. The lender keeps the note until you pay off the loan. Once the debt is gone, the lender marks the note as paid in full and returns it to you.

Fate of the Note

If your original lender assigns your mortgage to someone else, the note goes with it. To do this, the bank signs over the note to the new lender. The new company now has the same power to demand payment as the first lender. If everything goes smoothly and you keep up payments, eventually you'll pay off the note. Whichever lender holds it then marks it as paid in full and sends it back to you.

Destiny of the Deed

After the grantor makes out the deed, he files it in the county registry, making your ownership part of the public record. If you sell the house or give it to your children, you can't simply give them the old deed with new names on it. Instead, you write a new deed and use that to convey the title. Your old deed remains on file with the registry forever so future buyers can track the chain of title and make sure it's valid.

About the Author

A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.

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