The payor owes the money and makes the payments. The payee is owed the money and receives them. On a seller-financed note, the buyer of the property is the payor and the seller is the payee.
Two sides of one promise
A promissory note is a written promise to pay, so it needs someone making the promise and someone receiving it. The payor makes it and signs the note. The payee is named in the note as the person to be paid, and keeps the signed original as proof of the debt. If you lose track of which is which, the words themselves help: the payor pays, and the payee is paid.
The same two people under other names
If you have read other pages in the note basics guide, you have met these two people under several names. Each document in a loan file has its own vocabulary for the roles, which can make a simple note look more complicated than it is.
| Where you see it | The person who owes | The person who is owed |
|---|---|---|
| Promissory note | Payor, payer or maker | Payee or holder |
| General loan language | Borrower or obligor | Lender or obligee |
| Mortgage | Mortgagor | Mortgagee |
| Deed of trust | Trustor | Beneficiary |
| Seller-financed sale | Buyer of the property | Seller of the property |
“Payor” and “payer” are two spellings of one word. Legal documents favor “payor”, and on this site we write “payer” or “borrower”. “Maker” means the person who makes the promise. Any of the others you meet in your own papers can be looked up in the note glossary.
The mortgage pair is the one that trips people up, because it feels backwards: the homeowner gives the mortgage, which makes them the mortgagor, and the lender receives it, which is what a mortgagee is.
What happens to each role when things change
The payee printed on the face of the note is the original one. If that person sells the note, its buyer becomes the new payee. The transfer is made by an endorsement on the note or on an attached page, together with an assignment of the mortgage or deed of trust. The payor is then told in writing where to send future payments, and their rate, payment amount and payoff date stay as they were.
The payor’s side is stickier. Whoever signed stays responsible until the note is paid off or the holder agrees in writing to let someone else take it over. When the payor sells the property, the lien has to be cleared before the new owner gets clear title, so the note is paid off out of the sale price unless the holder has agreed to something else.
Why a note buyer studies the payor
A note is only as good as the person paying it and the property behind it. If you are the payee and ever decide to sell, an investor will look closely at:
- Payment history. Whether the payments have arrived on time, and for how long. A track record of payments is called seasoning.
- Credit. How the payor has handled other debts, which is the starting point for how the borrower’s credit affects your note’s value.
- Equity. How much of their own money the payor has in the property, starting with the down payment. Someone with a lot to lose has a strong reason to keep paying.
A strong payor lowers the investor’s risk, which raises the price, and a payor who is often late does the reverse. To find out how your own payor looks to a buyer, send us the note details and we will show how each of these moved the price.
What each side should keep
The payee needs the original signed note, the recorded mortgage or deed of trust, and a dated record of every payment received. Those papers are also the first things a note buyer asks to see, so a payee who keeps them in order has already done most of the preparation for a sale.
The payor needs a copy of everything they signed and proof of each payment. Once the debt is cleared, they should also get the recorded release showing that the lien has been removed.
Related questions
Is it spelled payor or payer?
Both are correct and mean the same thing. Legal documents often use payor, while everyday writing tends to use payer.
Can a note have more than one payor or payee?
Yes. Two people who signed the note together are both payors, and how the responsibility is shared between them depends on the wording of the note. Two people who sold a property together can both be payees, and both would need to sign if the note is sold.
Does the payor have to agree if the payee sells the note?
Generally no, unless the note itself says otherwise. The payor is told in writing where to send future payments, and the terms of the loan do not change.