Question

Compare the following pairs of terms:

a) A note and a mortgage

b) Fully-amortizing loans and negative-amortizing loans

c) Abstract of title and title

d) General partnership and limited partnership

Answer 1

a) A Note and a Mortgage

A note or Promissory note is a promise given by a debtor to the creditor to repay the loan on time. Whereas Mortgage or deed of trust is giving a collateral for the loan as a security.Promissory note contains details of repayment, interest rate etc. Mortgage involves the method to follow if the borrower doesn't repay the amount. Note gives a promise to make payment while mortgage tells the way to get the money back.

b) Fully-amortizing loans and Negative-amortizing loans

In Fully-amortizing loans, if the borrower makes regular payment as per the amortization schedule, the full amount will be paid off. When the borrower makes periodic payments, the total amount owed by the borrower will come down.

Negative-amortizing loan is a type of loan where the payments are smaller than the interest costs. Such unpaid interest balance will increase the total amount owed by the borrower. Even when the borrower makes payment, the total amount owed will go up since the periodic payments are not enough to cover the interest expenses.

c) Abstract of title and Title

Title or Title Insurance is used to protect against an event and it requires a Abstract of title. Title is a contract of indemnity against the loss in relation to the title of the property.

Abstract of title includes facts or information regarding the property or asset or various instruments or documents of the property. It also includes grants, wills etc

d) General partnership and Limited partnership

Partnership is a business agreement between two or people to share the business responsibility. In General partnership the partners have unlimited liability for the business losses. Their personal assets are also at risk.

But in Limited partnership the partners liability is limited to the extent of capital contributed by them. Their personal assets are not at risk in this type of partnership. There will be a general partner who will be paid a management fee and he will be responsible for debts and liabilities.