A Closer Look at the Mortgage Note
In Switzerland, a mortgage note is the most common form of collateral for real estate financing.
Definition
According to Article 842 of the Swiss Civil Code, a mortgage note is a personal claim secured by a real property lien.
Role of the Mortgage Note
As a non-possessory security interest, a mortgage deed ensures that the creditor or lender will be repaid the full amount of the loan (the principal and interest) by the borrower or debtor.
Otherwise, the creditor may be reimbursed from the proceeds of the auction of the real property listed in the promissory note.
The Form of the Mortgage Deed
It may be registered or bearer. It may be in paper form or recorded in a register.
When it is in writing, it is drawn up by a notary and recorded in the land registry on the page corresponding to the mortgaged property. As such, it constitutes a real estate security interest that specifies the amount the creditor may claim from the debtor, as well as the real property serving as collateral.
It remains in the possession of the creditor or the notary until the debtor has repaid it in full.
Once the loan is repaid, the security reverts to the debtor's possession.
In such a case, the borrower is free to use that same security to take out new loans, up to the amount indicated on the promissory note.