Which statement describes the difference between a promissory note and a mortgage?

• A. A promissory note transfers title to the property.
• B. A promissory note is a borrower’s promise to repay a debt; a mortgage pledges real property as security.
• C. A mortgage creates a lien; a promissory note is a type of deed.
• D. A mortgage is an informal IOU; a promissory note is a credit agreement.

Answer: (B)

Understanding the difference comes down to promise versus security. A promissory note records the borrower’s promise to repay a loan, detailing the amount, interest, and repayment schedule, and it creates personal liability for the borrower. A mortgage, on the other hand, is the security instrument that pledges real property as collateral and creates a lien on that property in favor of the lender. This lien gives the lender a right to foreclose if the borrower defaults. The promissory note does not transfer ownership or title to the property, and the mortgage does not by itself create the debt—it secures the debt described in the note. That’s why the statement describing the difference is that a promissory note is a borrower’s promise to repay a debt, while a mortgage pledges real property as security.