By the time you sit down to close a fix and flip, you have already read the term sheet and signed the commitment letter, and you think the paperwork is behind you. Then the closing package lands and it is thirty or forty pages of documents you have never seen, and two of them do almost all the legal work: the promissory note and the mortgage, sometimes called a deed of trust. Everything else in the stack supports those two. Most investors sign them without reading because the closing agent is waiting, and that is a mistake, because the note and the mortgage are the documents that define what you owe, what the lender can do if you do not pay, and what it takes to get your property back free and clear. This guide walks through what you are actually signing at a fix and flip closing in 2026 and why the two core instruments deserve five minutes of your attention.
We arrange fix and flip and bridge loans for investors across Pennsylvania and additional states, and one of the most useful things we do is make sure a borrower understands the closing documents before they sign rather than after. The note and the mortgage are not negotiable at the closing table, which is exactly why they should have been read days earlier, back when the commitment letter set the terms. We cover that earlier document in our guide to the fix and flip loan commitment letter.
The promissory note: what you owe and how
The promissory note is your personal promise to repay the money. It is the document that states the loan amount, the interest rate, how interest is calculated, when payments are due, and when the whole balance comes due at maturity. On a fix and flip loan the note also spells out the terms that make short-term lending different from a mortgage: the default interest rate that kicks in if you miss a payment, any minimum interest or interest guarantee, the late-fee structure, and the prepayment terms. The note is where the real cost of the loan lives, and it is where a fast payoff or a slow one gets expensive. We cover the fast-exit side of that in our guide to fix and flip loan minimum interest, but the note is the document that governs all of it.
Read the note for three numbers in particular. First, the default rate, because a rate that jumps from a normal figure to eighteen or twenty-four percent on default turns a short cash crunch into a serious one. Second, the maturity date, because that is the day the entire balance is due and a flip that has not sold by then needs a plan. Third, any minimum-interest or exit terms, because a clean four-month flip can still owe interest as if the loan ran six months if the note guarantees it. These are the numbers that first appeared on your term sheet, and the note is where they become binding. If you have not learned to read a term sheet yet, start with our guide to how to read a fix and flip loan term sheet, because the note simply makes the term sheet enforceable.
The mortgage or deed of trust: what secures the loan
If the note is your promise to pay, the mortgage is what happens if you do not. The mortgage, or in some states a deed of trust, is the document that pledges the property as collateral and gives the lender the right to foreclose if you default on the note. It records against the property in the county land records, which is what creates the lien the title company reports, and it is the reason the lender is willing to hand you a large sum against a house you just bought. The mortgage is where the lender’s remedies live: the right to accelerate the balance on default, the right to foreclose, and the covenants you agree to keep, like maintaining insurance and paying taxes, that we cover in the closing-requirements context of our guide to fix and flip loan title insurance and closing requirements.
A worked example: how the documents line up on a real deal
Let me put a deal on it. You buy a flip for 200,000 dollars with a rehab budget of 60,000 dollars, so your total project is 260,000 dollars. The lender funds ninety percent of the purchase, 180,000 dollars, and finances the full rehab through a draw schedule, for a total loan of 240,000 dollars. At closing you bring the remaining 20,000 dollars of the purchase plus your closing costs.
The promissory note you sign states that 240,000 dollar loan amount, the interest rate, that interest accrues on funds as they are drawn rather than on the full amount from day one, the monthly payment, and the twelve-month maturity. The mortgage you sign pledges the property as collateral for that 240,000 dollars and records a first lien against it. If your flip sells for 340,000 dollars nine months in, the payoff satisfies the note, the lender releases the mortgage, and the lien comes off the title so the buyer takes clean title. If the flip does not sell by the twelve-month maturity, the note is in default, the default interest rate in the note applies, and the mortgage gives the lender the path to foreclose if you cannot cure or exit. You can model the loan amount, the draw-based interest, and the payoff on our DSCR deal calculator before you close.
The guaranty: why the LLC does not always protect you
Most fix and flip loans close in the name of an LLC, and many investors assume that means the debt stops at the entity. It usually does not, because the closing package almost always includes a personal guaranty, a separate document in which you personally promise to repay the loan if the entity cannot. The note is signed by the entity; the guaranty is signed by you. Together they mean the lender can pursue the property through the mortgage and pursue you personally through the guaranty. This is one of the most important documents in the stack and one of the least read. We cover it in detail in our guide to fix and flip loan personal guaranty and recourse, and if you flip through an entity you should understand how the guaranty follows you, which we also cover in our guide to fix and flip loans for LLCs and other entities.
The supporting documents in the stack
Around the note and the mortgage sit the documents that make the closing work. The settlement statement itemizes every dollar moving through the closing and is the one to reconcile against your term sheet, which we cover in our guide to the fix and flip loan settlement statement. There is usually a construction or rehab loan agreement that governs the draw schedule, an assignment of rents if the property could produce income, and various affidavits and disclosures. Your closing costs, the origination points, the title fees, and the recording charges, all land on the settlement statement, and we break those down in our guide to fix and flip closing costs. None of these carry the legal weight of the note and the mortgage, but the construction loan agreement in particular controls how you actually get your rehab money, so it is worth a read.
What to check before you sign
You cannot renegotiate the note and mortgage at the table, so the review happens earlier. Confirm the loan amount, rate, and maturity on the note match the commitment letter exactly. Confirm the default rate and any minimum-interest term are what you expected. Confirm the mortgage records as a first lien and that the property description is correct, because an error in the legal description can cloud your title later. Confirm the guaranty is what you agreed to and that no one else is being asked to sign it who should not be. If anything on the note or mortgage does not match the commitment letter, that is the moment to stop and ask, before your signature makes it binding.
The bottom line on the note and mortgage
The note and the mortgage are the two documents that turn a fix and flip approval into a legal obligation. The note defines what you owe, the rate, the maturity, and the cost of default; the mortgage pledges the property and gives the lender its remedies; and the guaranty usually puts you personally behind the entity. Everything else in the closing package supports those instruments. Read them when the commitment letter lands, not when the closing agent is waiting, and make sure every number matches what you were quoted. Understand the two core documents and the rest of the stack becomes routine. Sign them blind and you have agreed to terms you never actually read.
Want us to walk through your closing documents before you sign? Send the commitment letter and the closing package through our contact page or call 412-990-2941. You can model the loan and payoff on our DSCR deal calculator, and you can see how our rehab loans are structured on our fix and flip and bridge loan page.
FMC Capital is a Pittsburgh-based licensed mortgage brokerage, NMLS #1840537. This article is for educational purposes only and is not a commitment to lend, an offer of credit, legal advice, or financial advice. Fix and flip loan documents, terms, rates, and qualification standards vary by lender, property, borrower, and market, and are subject to change at the time of application.