A prospective buyer offers earnest money of 1,000 and a promissory note for 4,000; must the promissory note be tied to the buyer's mortgage?

• A. No, the note is a personal promise to repay a debt and is a complete contract alone
• B. Yes, the note must be tied to the mortgage
• C. Yes, the note must be secured by the property
• D. No, the note can be substituted with a gift letter

Answer: (A)

A promissory note is a personal promise to repay a debt and stands as its own contract. It does not by itself create a lien on the property. The loan’s security—if the debt is to be tied to the real estate—comes from a mortgage or deed of trust, which encumbers the property and gives the lender remedies if payment stops. So the note for 4,000 can exist as a standalone obligation, and it does not have to be tied to the buyer’s mortgage. If the parties want the loan to be secured by the property, a separate security instrument would be used. Gift letters relate to funds for the purchase and are not a substitute for a promissory note.