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Adjustable Rate Mortgage Note Negative Amortization
1. Parties. This Note is for value received by [names] of [address] (Borrowers), from [bank], a [state] banking institution with principal place of business at [address] (Bank).
2. Promise to Pay and Obligation. Borrowers jointly and severally promise to pay the principal sum of ---------- dollars ($----------), and any amounts added pursuant to Paragraph 5, plus interest, to the order of Bank, or Bank's assigns, at Bank's principal place of business, or any other place as the holder of this Note may state in writing. The amount due to Bank will be paid by Borrowers on or before [date]. This amount due consists of the principal of ---------- dollars ($----------), and any amounts added pursuant to Paragraph 5, plus interest, from [date], on the balance of the principal that remains unpaid, at the rate of ---------- percent (----------%) per year for the next [number] years.
3. Change in Interest Rate. The interest rate to be charged on the unpaid principal will change on each anniversary date of this Note to a rate equal to the interest rate of ---------- percent (----------%), adjusted upward or downward by the difference in the Index between the date of this Note and that anniversary date. The term "Index" means the index computed by [party computing index].
Promptly after each anniversary date of this Note, Bank will mail Borrowers a written notice of any change in the interest rate and the monthly payment that would be required to fully repay the unpaid principal as of the maturity date of this Note as such rate of interest.
4. Payment Terms.
(a) Initial Monthly Payments. Borrowers' initial monthly payment is ---------- dollars ($----------), which is payable on the first [month and year] of each month from [date] until and including [date: month preceding the fifth or tenth anniversary of the first due date, or other applicable date].
(b) Change in Monthly Payments. From and after [date: the fifth or tenth anniversary of the first due date, or other applicable date] (initial Change Date), and, thereafter, the monthly installments will be increased or decreased on the [day and month] of each year (Change Date) if the rate of interest is increased or decreased as provided in Paragraph 3.
Prior to the Initial Change Date and each subsequent Change Date, Bank will calculate the substantially equal monthly payment required to repay the unpaid principal of this loan (including all sums added under Paragraph 5) in full on the maturity date of this Note. Bank will send Borrowers written notice of such monthly payment before the Initial Change Date and each subsequent Change Date. Borrowers agree to make such monthly payment, as changed from time to time.
5. Negative Amortization. The monthly payment stated in Paragraph 4(a) may be less than the interest due on the unpaid principal if the interest rate increases before the Initial Change Date. If so, Bank will, each month, add all accrued and unpaid interest to the unpaid principal, unless Borrowers elect to pay such accrued and unpaid interest in addition to the amount of the initial monthly payments. For purposes of this Note, the term "unpaid principal" includes all accrued and unpaid interest added to Borrowers' obligation via this Paragraph 5.
6. Excess Payment. The monthly payment stated in Paragraph 4(a) may be greater than the interest due on the unpaid principal if the interest rate decreases before the Initial Change Date. If so, Bank will, each month, apply the excess to reduce the unpaid principal balance as if Borrowers had made a partial prepayment.
7. Limit on Negative Amortization. The amount of accrued and unpaid interest added to the balance of this loan pursuant to Paragraph 5 may not exceed ---------- percent (----------%) of the principal sum stated in Paragraph 2. Notwithstanding Paragraph 4(a), if this amount will be exceeded as a result of any change in interest rate, Borrowers will, thereafter, make monthly payments equal to all interest accruing on the unpaid principal, until the Initial Change Date.
8. Late Payments.
a. Interest on Default. If any part of the principal or interest remains unpaid after maturity, or after any default under this Note that remains incurred, the interest rate on the principal remaining unpaid will be the interest rate stated in Paragraph 2, as changed from time to time pursuant to Paragraph 3, plus ---------- percent (----------%) per year.
b. Overdue Installments. When payment of any installment is more than [number] days late, Bank may charge a late charge of ---------- percent (----------%) for each dollar overdue. This late charge may not be greater than the maximum allowed by statute to Bank (for defraying handling expenses of late payments).
9. Application of Paid Installments. Borrowers' monthly payments will be applied first to accrued interest on the unpaid principal for the month that has just ended and, second, to amortization of the principal.
10. Security. This Note is secured by a mortgage, dated [date], which has been executed, acknowledged, and delivered to Bank by Borrowers.
11. Remedies on Default. If Borrowers fail to
(a) pay the unpaid principal or interest or any installment due on this Note; or
(b) comply with the terms, conditions, or provisions of the mortgage securing this Note; or
(c) comply with the terms, conditions, or provisions of any other agreement entered into by Borrowers with Bank, all unpaid indebtedness of Borrowers will become immediately due and collectible at the option of Bank. If Bank delays in exercising this option, that delay will not operate as a waiver or prevent its exercise during the period of the existing or any later default.
12. Waiver of Notice and Presentment. The makers and indorsers of this Note severally waive presentment for payment, protest, notice of protest, and notice of nonpayment of this Note.
*** If Required By State Law ***
This Section for Notary:
State of _________
County of ________ [County]
On [Date] before me, [Name of Notary], notary, personally appeared [Name of Person(s) Involved], personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
Witness my hand and official seal.
My commission expires: _____