Sunday, December 30, 2007

What is a Mortgage Note?

What is a Mortgage Note?

When you buy a house and finance your purchase with a bank loan, you sign a mortgage agreement assigning your house as collateral.
  • A written promise to pay a stated amount of money at one or more specified future dates.
  • Secured by the pledging of certain assets, usually real estate, as collateral.
  • Generally requires periodic (monthly/quarterly) payments of principal plus interest.
Long-term obligations (notes, mortgages, bonds) usually are reclassified and reported as current liabilities when they become payable within the upcoming year (or operating cycle, if longer than a year). A mortgage note might also just be referred to as a note receivable. A note receivable is a written promise to receive a specific amount of cash from another party on one or more future dates. This is treated as an asset by the holder of the note.

Accounting Examples Related to Mortgage Notes and other Note Receivables:

Journal Entry Note Receivable
Note Receivable Interest Revenue
Journal Entries
Adjusting Journal Entry for Note Receivable

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The information on this site is for informational purposes only and should not be used as a substitute for the professional advice of an accountant, tax advisor, attorney, or other professional.