What is the exam-ready distinction?
| Official syllabus topic | Financing: Promissory Notes and Security Instruments |
|---|---|
| Official PSI area | Financing |
| Published weight | 10% of the 100-question national portion |
| Source edition | PSI Georgia Candidate Information Bulletin dated July 1, 2026 |
The Rule
PSI publishes a weight for the complete official area, not a guaranteed count for this individual comparison. Use the source, document, actor, event, and timing stated in the question before applying a memorized definition.
Side-by-side comparison
Read across each row. The terms are deliberately compared on identical dimensions so the difference remains clear when the exam hides the vocabulary inside a scenario.
| Decision dimension | Promissory note | Mortgage | Georgia security deed |
|---|---|---|---|
| Function | Evidence of the debt and repayment promise | Security instrument encumbering real estate | Georgia security instrument conveying legal title as security |
| Main parties | Borrower or maker and lender or payee | Mortgagor and mortgagee | Grantor and grantee |
| Contains | Principal, interest, payment, maturity, and default terms | Property collateral and enforcement rights | Property collateral, title conveyance, and commonly a power of sale |
| After payoff | Debt is satisfied | Mortgage is released or satisfied | Security deed is canceled or reconveyed under Georgia law |
Decision rule
Georgia-specific distinction
Worked example
Scenario. At closing, a Georgia borrower signs one document promising monthly repayment and another conveying title as security.
Reason it through. The repayment promise and collateral instrument are legally distinct even though they relate to one loan.
Answer. The first is the promissory note and the second is the security deed.
Common exam traps
- Calling the note the collateral instrument
- Saying Georgia legally prohibits mortgages
- Adding a trustee to an ordinary security deed
- Assuming cancellation of debt automatically describes public record steps
Original practice questions with detailed explanations
These are original instructional questions mapped to the July 1, 2026 PSI outline. They are not copied from PSI or any live examination. Choose an answer before opening the explanation.
Question 1At a Georgia closing, which document is the borrower's personal promise to repay the loan?
- A. The security deed
- B. The warranty deed
- C. The promissory note
- D. The Closing Disclosure
Show answer and explanation →
Answer: C. The promissory note
The promissory note is the evidence of the debt and the borrower's promise to repay principal and interest. The security deed is signed at the same closing but serves as the collateral instrument. Candidates often pick the security deed because the two are signed together, yet it secures the debt rather than promising payment.
Question 2In a typical Georgia home loan, what does the security deed do?
- A. Creates a lien while the borrower keeps legal title
- B. States the borrower's promise to repay principal and interest
- C. Places legal title with a neutral trustee for the lender
- D. Conveys legal title to the lender as security for the debt
Show answer and explanation →
Answer: D. Conveys legal title to the lender as security for the debt
Georgia's deed to secure debt conveys legal title to the grantee, usually the lender, as security until the debt is paid. A lien with title staying in the borrower describes a lien-theory mortgage, the most plausible wrong answer. A trustee holding title describes a deed of trust, which is not how an ordinary Georgia security deed works.
Question 3A Georgia borrower pays the home loan in full. Which statement is accurate?
- A. The debt is satisfied, and the security deed is canceled of record
- B. The promissory note transfers legal title back to the borrower
- C. The lender keeps legal title until the property is next sold
- D. The security deed is removed from the public record automatically
Show answer and explanation →
Answer: A. The debt is satisfied, and the security deed is canceled of record
Payoff satisfies the debt on the note, and the security deed is then canceled so the public record reflects the release. The note never held or transferred title, so it cannot return it. Assuming the record clears itself is the mistake, since cancellation is a separate step from paying the debt.
Ready to move on?
You have this distinction down when all of these are true.
- Define every compared term without using the other term as the definition.
- Rebuild the comparison table from memory.
- State the decision rule and Georgia distinction without notes.
- Solve the worked example after changing one key fact.
- Explain the rule or fact that makes each distractor wrong.
- Answer all three original questions correctly in mixed practice on a later day.
Recommended next lesson
Continue with Lien Theory Versus Title Theory. Next, lien theory versus title theory explains why Georgia's security deed passes legal title to the lender while a lien-theory mortgage leaves title with the borrower.
Return to the complete exam-concept library or the Financing hub.