General Notes For Commercial Construction is a form of mortgage where an "assignor", commonly a company or individual, pledges the underlying real estate to secure a loan. In essence, a "note" is simply an agreement that outlines the details of how the property will be used in exchange for payment of funds. The notes can come from private sources, or they can come from public sources. They are not usually a legal document, but rather just a verbal agreement.
There are many different types of commercial general notes, including: first mortgages, interest-only notes, and balloon notes. Most notes include provisions that allow the borrower to amend the contract at any time. While this does not affect the value of the note, it changes the interest rate and the terms of the contract. There are many different ways to create these notes. For example, real estate notes can be created using notes receivable financing, construction notes, land contracts, vendor notes, construction Ledger Securitization, commercial bridge notes, and financing receivable notes.
First Mortgages: First mortgages refer to the loans secured by the underlying property. These loans are often used when purchasing property, especially when the buyer is not required to provide any down payment. The process of getting a first mortgage is much like applying for a personal loan, except that instead of working with banks, the buyer obtains credit from a third-party financial institution.
Interest Only Notes: An interest-only note is one that pays a fixed amount each month. Unlike a fixed rate mortgage, the interest only payment remains fixed throughout the life of the loan. This means that at the end of the term, the buyer is paying less than what he would if the loan were to continue until it was paid off completely. If the market rises, the lender will increase the interest rate, but since the payments remain low, the buyer will still be able to afford them. An interest-only note is good for some people who have a steady source of income, or people who own a piece of property that will appreciate in value. Another advantage to this type of note is that the monthly payments do not accrue interest.
Promissory Notes: Similar to an interest-only note, a promissory note is one that is secured by the underlying property and pays a fixed rate over a certain amount of time. As with an interest-only note, the buyer is not required to pay anything until the full amount has been collected. However, there are some differences between a promissory note and a general note. A promissory note must be filed with the county in which the property is located. General notes can be anywhere in the United States.
Security Features: Some notes feature added security features to protect the lender in the event of a default. Some lenders will add additional fees to the note if the borrower defaults, such as adding late-payment penalties. Other notes may offer the option of converting the note into a mortgage loan. If the borrower does not qualify for the mortgage loan, the lender still has the right to sell the note.
Transferable: Some notes are transferable, meaning they are easier to sell than others. If existing buyer wishes to purchase the note and then sell it within a specified time period, the buyer can easily do so. This is different from unsecured loans, where the borrower has to provide security for the loan before they can obtain financing. Transferable notes do not need to provide security because the buyer can obtain financing without securing a loan. However, note buyers should expect to pay administrative fees and closing costs for transferring a note.
Types of Notes: There are many types of notes, depending on the business the buyer is involved in. Business notes usually pay small or regular installments. Real estate notes usually pay off the debt of the purchaser after a specified time period. When buying real estate notes, the buyer needs to remember that they will be required to put down a substantial amount of money. Other types of notes include corporate notes, lottery winnings, child care obligations, tax liens, and more.