Welcome and thank you for using Ask a Lawyer. My name is Gurney, and I'm the attorney who will be assisting with your question. I'm happy to draw on my years of experience as an attorney and former prosecutor to offer some guidance. Please note, if you click the button for a second opinion, that will end our chat and I won’t be able to reply anymore.

What concerns do you have about the verbiage in the Promissory Note that you would like to address?

Thank you for clarifying.The language you pointed out — "The Lender shall have the sole option to accept it as full payment for the Borrowed Money without further liabilities or obligations" — gives your lender (your family member) the full power to decide to accept a partial payment or property value in lieu of the full $900K owed if they wish. This could create confusion or problems later if expectations are not clear.

If you are concerned about fairness or ensuring that the loan terms protect both sides properly, you might want that clause either removed or rewritten. It could otherwise give the lender unexpected flexibility to settle the debt for less than intended — which could matter later for taxes, disputes, or ownership clarity, especially because your property is worth much more than the loan amount.

If you want a more balanced agreement, you might consider revising the language so that both parties must agree in writing if anything other than full repayment is going to satisfy the debt.

If you'd like, I can write an outline of the additional terms you might want to include in your Promissory Note and Deed of Trust to protect yourself. Would that help?

That would cost nothing more than a bit of patience! :)

Additional Terms for Promissory Note:

• Clear Repayment Schedule: Spell out exact payment dates, amounts, and any grace periods (example: 5 days to pay late without penalty).
• Late Fee Clause: State the specific late fee if a payment is missed (example: $50 late fee after 5 days).
• Prepayment Clause: Allow yourself the right to prepay the loan without penalty if you want to pay it off early.
• Default Definition: Clearly define what counts as default (missing payments, bankruptcy, selling property without permission, etc.).
• Acceleration Clause: If you default, the full loan amount becomes immediately due.
• Amendments in Writing: Require that any changes to the agreement must be in writing and signed by both you and the lender.
• Dispute Resolution: Add that any disputes must go to mediation or arbitration first before a lawsuit.

Additional Terms for Deed of Trust:

• Subordination Clause: Make sure any future loans or liens must be approved by your family lender first.
• Insurance Requirements: You must keep property insurance on the home and list the family lender as a "loss payee" to protect their interest.
• Maintenance Clause: Promise to maintain the property in good condition to protect its value.
• Release Clause: Spell out how the lien will be removed once the loan is fully paid.
• Assignment Rights: Prevent the lender from transferring the loan or lien to someone else without your written consent.

Does that help?

You are exactly right:

• Promissory Note: defines the terms of the loan (how much you owe, payment schedule, interest, etc.).
• Deed of Trust (Lien): secures the loan by tying it to your property, meaning if you default, the lender can foreclose.

For your transaction, the basic requirements will be:
✅ A properly written and signed Promissory Note.
✅ A Deed of Trust signed and recorded with the county recorder’s office to create the lien.
✅ A payoff to South Star Bank to release their lien first (you can't have your family lender in second position unless they agree).
✅ A Release of Lien from South Star Bank, once they are fully paid off.
✅ Updated title insurance if needed, to confirm there are no hidden liens.

Sure! Here's a short and clear breakdown:

• Promissory Note: Loan amount, interest rate, payment schedule (monthly, lump sum, etc.), maturity date (when full payment is due), late fees, what happens if you default (acceleration clause).
• Deed of Trust (Lien agreement): Legal description of the property, parties involved (borrower, lender, trustee), authority for lender to foreclose if you default, duties of borrower (maintain property, pay taxes, insurance), how and when the lien is released once the loan is paid.

The Note is about the promise to pay, and the Deed of Trust is about what happens to the property if you do not pay.

Right, it seems more appropriate.

Yes, if your family member has the cash ready and you have a properly signed Promissory Note and Deed of Trust with them, you can use their funds to pay off the South Star Bank build loan in full. Once the loan is fully paid, your obligation to South Star Bank ends, and they must release their lien on your property.

In that statement, "they" means your family lender.

South Star Bank holds the current first-position lien. If you do not pay off South Star Bank first, your family’s lien would automatically be second in line. Most lenders — even a family member — want to be in first position to protect their loan. If your family member agrees to be second (meaning South Star Bank gets paid first if there’s a foreclosure), that's allowed, but it’s risky for them.

Usually, the clean way is: pay off South Star Bank first, they release their lien, then your family’s lien moves into first position safely.

Yes, exactly — the payoff to South Star Bank can come directly from your family member’s loan funds.

At closing, the family lender would wire the payoff amount (around $940K) directly to South Star Bank to satisfy and release their lien. Then, you and your family member would finalize and record the new Promissory Note and Deed of Trust securing the loan between you two.

This way, you never personally have to front the $940K — it flows straight from your family lender to South Star Bank at payoff.

No, you would not usually put wiring instructions directly into the Promissory Note. The Promissory Note should just say that the loan proceeds will be used to pay off the existing South Star Bank loan.

You would handle the specific payment details (like wiring instructions) separately, either in the loan closing instructions or in a simple payment direction letter at the time of closing.

The correct general wording in the Promissory Note could be something like:

"Loan proceeds shall be used to satisfy and pay in full the outstanding loan secured by the Deed of Trust currently held by South Star Bank."

I like it too! I’m glad that helps. Did you have more questions about this? I'll be happy to help more.

You are on the right track — a Deed of Trust is the correct format if you are creating a lien to secure a loan, not transferring ownership like a warranty deed or quitclaim deed would.

You do not need a General Warranty Deed, Special Warranty Deed, or Quitclaim Deed — those are for buying or selling property.

Since you are in Texas, you should use a Texas-specific Deed of Trust. Texas real estate law has unique requirements, especially regarding foreclosure rights and trustee roles, so a Deed of Trust from another state (like California, Idaho, or Maryland) will not work properly.

You certainly could! I was about to head out, but I happen to be a Texas lawyer. I'll write up one that's specific to Texas first thing in the morning — how does that sound? Let's just make that a new chat and I'll be on it, if you'd like.