What is a promissory note?

A promissory note is fundamentally a written promise that indicates a borrower’s commitment to repay a specified amount of money to a lender over a predetermined period of time. This legal document outlines the terms of the loan, including the amount borrowed, interest rates, repayment schedule, and any potential consequences for defaulting on the loan.

In the context of real estate, it often accompanies a mortgage, where the promissory note serves as evidence of the debt the borrower owes to the lender. It is crucial because it establishes a clear obligation for the borrower and protects the lender's rights to recover the funds lent.

The other options do not accurately define a promissory note. A contract for the sale of property refers to a purchase agreement between buyer and seller, a declaration of loan default reports failure to meet loan obligations, and a summary of loan terms provides an overview rather than the specifics of repayment. Hence, the correct understanding of a promissory note is essential for real estate professionals and borrowers alike.