How do I file a lien for a private loan

Question

We own a property free and clear.  We’d like to borrow $50k from a private investor.  We’d like to sign a note and attach a lien so the investor is protected.

What are the mechanics to made this happen?

Attorney drafted note?  Can we draft it?

Is it just a matter of having a title company file it with the recorder of deeds?

Thanks!

Will Fraser · Answer

Hi @William C., in my state it's a simple thing to have the title company or an attorney draft.  I've noticed that the title company can do a Promissory note and a mortgage for about 60% of the cost of an attorney drafting it.

That could vary from state to state, and may be dependent on other factors I'm not aware of, but it's a good place to look.

Chris K. · Answer

@William C.

Note and a mortgage. Have an attorney handle it and have a title company record it for you. You don't want to be the drafter and take short cuts as there is a possibility that the court system may view this transaction as a consumer-to-lender transaction. You don't want to take shortcuts with notes and mortgages as it can have serious consequences for everyone involved.

As a former banking lawyer, I've seen people who do this for a living make fatal mistakes. And the problem is that due to the length of these documents, sometimes you don't realize the mistake for over a decade.

Maybe it's me being paranoid. But I've seen mortgages being declared invalid due to dumb mistakes. Now in the grand scheme of things, those mistakes don't matter to banks with millions, billions, and trillions in assets. But it will most likely matter a lot for most investors.

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.