How to write a promissory note amendment (with a sample)

A promissory note amendment is a short signed document that changes specific terms of an existing note and leaves everything else in force. It has to point to the original note by date, parties, and principal, spell out each change, and carry the signature of everyone who signed the original, including co-signers and guarantors.

An amendment keeps the original note's date and payment history intact, so the paper trail stays clean. A replacement note can work too, but then two documents describe one debt, and the new one needs language canceling the old. For one or two changes, an amendment is simpler. If you're still deciding whether a change is allowed at all, our post on changing the terms of a promissory note after signing covers the ground rules.

Start with identification. Someone reading the amendment years from now has to match it to one specific note without guessing. List the original note's date, the full legal names of the lender and borrower, the original principal, and the unpaid balance on the amendment date. If there was an earlier amendment, name it too, so the chain is complete.

Almost any term can move if both sides agree. The common ones are the interest rate, the payment amount, the payment schedule, and the maturity date. People also add a grace period, switch from monthly to quarterly payments, or put an installment note on interest-only payments for a few months. Change only what you mean to change, and say plainly that every other term stays the same.

Deal with any missed payments before you write new terms. If the borrower is behind, decide whether the past-due interest gets paid at signing or added to the principal, and put the exact figure in the amendment. Adding it to principal means the borrower pays interest on that interest from then on, which raises the real cost of the loan. Both sides should agree on the balance in writing, because every later number in the amendment builds on it.

Pick an effective date too. The cleanest choice is the day after a payment posts, so the old schedule ends and the new one starts with no partial month to sort out. Note which payment number was the last one under the original terms, and keep your payment log running straight through. If a dispute ever comes up, that log and the amendment together should tell the whole story without anyone's memory filling gaps.

Who has to sign, and why guarantors matter

The lender and every borrower sign. The step people skip is getting signatures from co-signers and guarantors. Under Article 3 of the Uniform Commercial Code, those people are often secondary obligors, and changing the deal without them can shrink or erase what they owe.

Section 3-605 sets the rule, and each state enacts it under its own number. Minnesota's version, Minn. Stat. 336.3-605, says an extension of the due date discharges a secondary obligor "to the extent that the extension would otherwise cause the secondary obligor a loss." Other modifications get similar treatment. The cure is in subsection (f): a secondary obligor isn't discharged if the secondary obligor "consents to the event or conduct that is the basis of the discharge." A guarantor's signature on the amendment is that consent, in writing.

A new rate also means a new usury question. A rate increase, a new fee, or a default rate added by amendment all have to fit under your state's cap for that kind of loan. Run the new numbers through our usury limit checker before anyone signs.

Worked example: stretching a $12,000 note

Say Dana lent Chris $12,000 at 6 percent, repaid over 24 months. The standard amortization formula gives a monthly payment of $531.85. After 12 payments, Chris owes $6,179.48 and asks to spread that balance over 24 more months instead of 12.

The payment drops by roughly half, but Chris pays $190.89 more in interest over the longer stretch. Rounding leaves a final payment of $273.82, so the amendment should state it or attach a new schedule. If Dana wanted 7 percent for the longer term, the payment would be $276.67, and that rate would need the usury check above.

Here's a sample amendment built on that example. Swap in your own names, dates, and numbers.

FIRST AMENDMENT TO PROMISSORY NOTE

This First Amendment is made on [date] between Dana Lee ("Lender") and Chris Moore ("Borrower"). It amends the promissory note dated [original date] in the original principal amount of $12,000.00 (the "Note"). The parties agree that the unpaid principal balance on the date of this Amendment is $6,179.48 and that no interest is past due.

1. Payment schedule. Beginning [first payment date], Borrower will pay $273.88 on the first day of each month for 23 months, followed by a final payment of $273.82, which includes all remaining principal and accrued interest.

2. Maturity date. The maturity date of the Note is changed to [new maturity date].

3. Interest rate. The interest rate remains 6 percent per year.

4. No other changes. Except as stated in this Amendment, all terms of the Note remain in effect. If this Amendment conflicts with the Note, this Amendment controls.

5. Guarantor consent. [Guarantor name] consents to this Amendment, agrees that the guaranty covers the Note as amended, and waives any discharge that might otherwise result from it.

Lender: ____________ Borrower: ____________ Guarantor: ____________ Date: ____________

Give every signer a copy and keep the signed amendment with the original note. If real estate secures the loan, the recorded mortgage or deed of trust may need its own modification, which we cover in our post on amending a note on a real estate loan.

Sources

• Minnesota Statutes 336.3-605, Discharge of secondary obligors