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
Land that has poor income potential, usually used in an agricultural sense meaning that the land is untellable, has poor access, is extremely steep, has suffered serious erosion, is ...
A situation that occurs when borrowed funds cost more than they produce. ...
Expenditure paid to occupy property over a specified time period. ...
Floor design to provide sound insulation qualities. A floating floor is separated from the building's structure by use of special resilient materials, often fabricated from fiberglass, or ...
The interest rate charged for a loan. For example, John obtained a $10.000 loan from the bank charging 10% interest. ...
mortgage being reduced through periodic principal and interest payments. ...
Use of other people's money (OPM) in an attempt to maximize the return but at high risk. The use of leverage in real estate investing is a way to maximize yield on a small down payment. ...
The initial lessee of rented property who then leases it to a subtenant. ...
Same as term resale proceeds: Net amount received when property is sold. It equals the selling price less outstanding mortgage balance less all costs incurred in connection with the sale. ...
Have a question or comment?
We're here to help.