Gap Promissory Note
(NY)

Summary

This is a template for a gap promissory note that may be used in New York by a lender that is consolidating an existing mortgage loan with a new mortgage loan. It is used to evidence and secure the new indebtedness. This template includes practical guidance, drafting notes, and an optional clause. A loan consolidation can occur either with the refinancing of a mortgage loan with a single existing lender involving new money, or a consolidation of a mortgage loan made by an existing lender with new money loaned by a new lender. If a new lender is involved, an assignment of mortgage is executed by the existing lender to transfer the existing note and mortgage to the new lender while the gap promissory note and gap mortgage are executed to evidence and secure the new indebtedness. The parties then execute a consolidated note and a consolidation, extension, and modification agreement consolidating the existing note and mortgage with the gap note and gap mortgage to form and secure a single consolidated loan. Loans are often structured this way in New York because the state's substantial mortgage recording tax is payable only on new indebtedness. This loan structure can be used with residential or commercial property that is being purchased or refinanced. For further guidance on gap promissory notes, see Gap Promissory Notes and Gap Mortgages / Deeds of Trust (Acquisition Loan). For further guidance on consolidating notes and mortgages in New York, see Mortgage Consolidations: Minimizing Mortgage Taxes (NY). For a full listing of content relating to promissory notes for use in various practice areas, see Promissory Notes Resource Kit (Small to Mid-Sized Law).