Florida Real Estate Sales Associate Examination Content OutlineReal Estate Closings and Post-ClosingMedium
A real estate agent is preparing for a closing. They are reviewing the various documents involved. Which of the following documents is primarily designed to protect the lender's interest in the property?
- ASurvey
- BOwner's policy of title insurance
- CMortgage (or deed of trust)
- DPromissory note
Show answer & explanationAnswer & explanation
Correct answer: C. Mortgage (or deed of trust)
The mortgage (or deed of trust) is the document that pledges the property as collateral for the loan, thereby protecting the lender's interest by giving them the right to foreclose if the borrower defaults. The promissory note outlines the borrower's promise to repay, but the mortgage secures that promise with the property.
Why the other options are wrong
- A. A survey identifies property boundaries and encroachments but does not directly protect the lender's financial interest in case of default.
- B. The owner's policy protects the buyer (owner) from title defects, not the lender.
- D. The promissory note is the borrower's promise to repay the loan, but it does not directly pledge the property as collateral; that is the function of the mortgage.
Mortgage Document
A legal instrument that pledges a property as security for the repayment of a loan, creating a lien on the property.
- Grants the lender the right to foreclose if the borrower defaults.
- Recorded in public records to provide constructive notice of the lien.
- Distinguished from the promissory note, which is the promise to repay.
Memory trick: Lenders Lean on the Mortgage Lien.