What is the exam-ready answer?
| Official syllabus topic | Financing Instruments and Promissory Notes |
|---|---|
| Official PSI area | Financing |
| Published area weight | 10% of the 100-question national portion |
| Exam portion | National salesperson portion |
| Source edition | PSI Georgia Candidate Information Bulletin dated July 1, 2026 |
The Rule
PSI publishes the weight for the complete content area, not a fixed question count for this lesson. Learn the rule well enough to apply it when PSI changes names, numbers, or parties in a new scenario.
The lesson
These ideas work together. On the exam, the wrong answers usually describe a nearby concept, so learn where each one stops.
Promissory note
The note identifies principal, interest, payment obligations, maturity, and borrower promises. It is negotiable or transferable subject to applicable law and its terms.
Security instruments
A mortgage creates a security interest under the jurisdiction's theory. A deed of trust commonly involves a trustor, beneficiary, and trustee. Georgia commonly uses a deed to secure debt or security deed.
Lien and title theories
National questions may distinguish lien-theory, title-theory, and intermediate-theory states. The parties' rights and foreclosure process depend on jurisdiction and instrument.
Satisfaction and assignment
When debt is paid, the security interest should be canceled or released in the public record. Assignment transfers lender rights; assumption or subject-to language concerns the buyer's relationship to debt.
Decision rule
Georgia-specific distinction
Worked example
Scenario. A borrower signs one document promising monthly repayment and another conveying a security interest in the home.
Reason it through. The repayment promise creates evidence of debt; the second document connects the real property to that obligation.
Answer. The first is the note and the second is the security instrument, commonly a security deed in Georgia.
Common exam traps
- Calling the note the lien instrument
- Assuming the lender occupies the property
- Treating assignment as debt satisfaction
- Using mortgage terminology without noticing Georgia's security deed
Original practice questions with detailed explanations
These questions were written for instruction and mapped to the current outline. They are not copied from PSI or any live examination. Choose an answer before opening the explanation.
Question 1At closing, a Georgia borrower signs one document promising to repay $300,000 at a stated rate and another conveying the home as collateral. Which document is the evidence of the debt?
- A. The security deed
- B. The promissory note
- C. The warranty deed
- D. The Closing Disclosure
Show answer and explanation →
Answer: B. The promissory note
The promissory note holds the borrower's promise to repay and the repayment terms. The security deed is the wrong answer because it is also signed at closing, but it secures the debt with the property rather than creating it.
Question 2Under a Georgia security deed, what does the borrower hold while the loan is outstanding?
- A. The equitable interest and possession
- B. Legal title, with the lender holding a lien
- C. Possession only, with no ownership interest
- D. Nothing until the loan is paid off
Show answer and explanation →
Answer: A. The equitable interest and possession
Georgia is a title theory state: the borrower conveys legal title to the lender as security and keeps the equitable interest and possession. The lien answer is the national mortgage model, which is the trap for candidates who miss the Georgia security deed.
Question 3A Georgia borrower pays the loan off in full. What should happen next to clear the public record?
- A. The lender assigns the security deed to the borrower
- B. The borrower records a new warranty deed
- C. The paid note is recorded to show payment
- D. The security deed is canceled of record
Show answer and explanation →
Answer: D. The security deed is canceled of record
When the debt is satisfied, the security interest should be canceled or released in the public record. Assignment is wrong because assignment transfers the lender's rights to someone else rather than ending them.
Ready to move on?
You are ready for the next lesson when all of these are true.
- Explain Financing Instruments and Promissory Notes in one clear answer without notes.
- Separate Promissory note from Security instruments using a fresh example.
- Apply the decision rule to a new fact pattern and name the fact that controls the result.
- State the Georgia-specific point or explain why the national rule applies unchanged.
- Answer every practice question and explain the rule each rejected option misapplies.
- Revisit this topic later in mixed practice without category labels.
Recommended next lesson
Continue with Basic Real Estate Financing Concepts. With the note and security deed identified, the next lesson moves to the numbers they create: principal and interest, loan-to-value ratio, equity, PITI, and the primary and secondary mortgage markets.
Return to the Financing hub to see every official branch and the complete lesson sequence for this content area.