Leilani is selling her Maui home and the buyer's lender is preparing the loan documents. The lender asks whether Hawaii requires a promissory note in addition to the mortgage. Which of the following best describes the relationship between a promissory note and a mortgage in a Hawaii transaction?
Correct Answer
B) The promissory note evidences the personal debt obligation, while the mortgage creates the lien on the real property as security
In a standard Hawaii mortgage transaction, two separate instruments are used: (1) the promissory note, which is the borrower's personal promise to repay the debt and evidences the loan obligation, and (2) the mortgage, which creates a lien on the real property as security for that debt. The note is the evidence of the debt; the mortgage is the security for that debt. This two-document structure is consistent with Hawaii's use of the mortgage as its primary security instrument.
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Related Topics & Key Terms
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Related Concepts
Usury is the practice of charging an interest rate that exceeds the maximum rate permitted by state law. Usury laws protect borrowers from excessive interest charges on loans.
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An adjustable-rate mortgage (ARM) has an interest rate that changes periodically based on market conditions, typically after an initial fixed-rate period. The rate adjustment is tied to a financial index plus a margin.
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