Straight Note
Definition of "Straight note"
The term straight note in real estate is also known as a promissory note. A straight note is defined as a loan agreement that generally requires payments of interest only over the term of the note. At the end of the term, the entire debt balance becomes payable in a single balloon payment. However, a straight note can also only require one payment that includes the amount of its principle to which the accrued interest is added that is also paid at the end of the loan in one balloon payment.
While other types of installment notes require monthly principal payments, a straight note can only demand interest payments. The principal payment is only covered at the end of the loan.
What is a Straight Note in Real Estate?
In real estate transactions, a straight note can also be referred to as a sleeper trust deed because interest usually accrues unpaid and is only required with the lump sum payment of the principal. However, if the principal is not required for a year or two, periodic accruing interest may be demanded during the term of a straight note.
A straight note in real estate isn’t a common loan because purchasing loans like mortgages are for much more extended periods of time. The most common reason to use straight notes in real estate is for short-term debt by lenders or carryback sellers. Another instance when the straight note is used in real estate is for evidence of short-term real estate commitments. For example, if someone wants to purchase a property, but the funds necessary for the closing might take a while to be granted, a straight note works as a bridge loan. The buyer will use the straight note to demonstrate a real estate obligation until the mortgage is granted.
Popular Real Estate Terms
(1) Subunit integral to a larger unit. (Usually associated with furniture). (2) Permanent fixture or appliance which is not intended to be portable and cannot easily be removed. A home has ...
Representation on a flat surface of any region that depicts the elevation of that region. ...
Individual: Adjusted gross income less itemized deductions and personal exemptions. After taxable income is computed, the tax to be paid can be determined by looking at the tax rate ...
Residential structure designed to house more than one family. Smaller multifamily housing units include duplexes, triplexes, and quadriplexes. Larger multifamily housing is normally termed ...
Amount required to payoff the full balance of the mortgage today. The amount equals the principal balance plus any prepayment penalty. ...
Provision in a lease agreement in which the lessee is given the right to buy the property at the end of lease term. In many cases, the option price is attractive to encourage acquisition. ...
Permission to do something that differs from the basic zoning requirement. An example is a homeowner receiving special authorization to build a two-family house in a single family zoned ...
Way to determine the capitalization rate of income property for valuation purposes by weighting the rate of interest and source of financing in percentage terms. ...
Bottom of a frame such as a window sill. ...
Have a question or comment?
We're here to help.