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
Justifiable and fair amount for a real estate transaction based on the conditions and limitations involved in the exchange. ...
The consolidation of items that have been considered a part of property but are not actually annexed, secured, or joined to it. ...
If you’re a renter and you own a pet, you might be familiar with the term pet rent. There has been a lot of discussion about the meaning of pet rent and controversy as it isn’t ...
Ownership rights to real or other types of tangible or intangible property. Property rights include exclusive occupancy, possession, use, and the right of disposition. Individuals groups, ...
The net operating income definition is the total profit generated by a business or real estate development after the necessary operating expenses are taken out. In order to determine the ...
Interest based on a 360-day year instead of a 365-day year. The former is referred to as simple interest and the latter is termed exact interest. The difference between the two types of ...
Mortgage clause causing the mortgagor to pledge additional properties, mortgaged or not, as collateral to the present mortgage. Failure to pay any of the other mortgages causes a ...
An accounting methodology for separately depreciating individual parts or elements of a building or improvement qualifying as business use or a depreciable asset under the IRS tax code. ...
An accessory building is an outdoor structure used by the occupants of the main building or house. They have different functions and can be detached or attached to the main building on the ...
Have a question or comment?
We're here to help.