Which two elements make up a mortgage loan?

A mortgage loan is primarily composed of two essential elements: the promissory note and the mortgage itself. The promissory note is a legal document in which the borrower agrees to repay the loan amount to the lender under specified terms, which typically include the interest rate, payment schedule, and consequences for defaulting on the loan. This note serves as the borrower's promise to pay back the loan.

The mortgage, on the other hand, is the security instrument that gives the lender a legal interest in the property until the loan is fully repaid. It outlines the rights and responsibilities of both the borrower and the lender regarding the property involved in the mortgage loan transaction. By establishing this legal claim, the mortgage secures the lender's investment by allowing them to take possession of the property if the borrower fails to meet the repayment obligations.

Understanding these two components is crucial when dealing with mortgage loans, as they delineate the financial arrangement and the security for the lender, establishing the framework for the loan agreement.