Mortgage vs Deed of Trust

Mortgage vs Deed of Trust - Whenever an individual requests for a loan for the purpose of buying a home, he is required to sign some sort of security instrument. This instrument can be presented to him in the form of a mortgage or a deed of trust. Though deed of trust and mortgage are quite commonly used in the real world, many people are still confused regarding these two documents. That’s when they aim to find out the difference between a mortgage vs deed of trust.

You will find that generally people refer to home loans as mortgages. However, this is not the correct technical term. The mortgage is actually just a document that has to be signed by the borrower and then presented to the lender. The aim is to secure the debt on the home. A deed of trust also serves almost the same purpose with the exception of a few differences that will be exposed when you compare mortgage vs deed of trust.

  • The first difference is in the fact that a mortgage document is signed between two parties which are the borrower and the lender. When you have a mortgage and a deed of trust in front of you, it becomes clear that a deed of trust is signed between three parties, which include the borrower and the lender as well as a trustee.
  • The signing of a mortgage creates a lien against the home and an entry is made into the public records. The ownership of the house is withheld until the full amount on the home is paid off and the lien released.  During this time the borrower or the lender can be the title holder depending upon the rules and regulations of the particular state. In comparison, the trustee of the deed of trust is a neutral party that is either regulated by the government or industry practices.
  • One of the most fundamental differences between a mortgage and a deed of trust arises in the process for foreclosure. In the case of a mortgage, the property is entitled to go under foreclosure if the borrower fails to repay the loan. In this case, the lender will be the one filing for foreclosure as he has the right to sell the property in order to recover his funds.
  • On the other hand, the entire foreclosure process can be much quicker when it comes to a deed of trust. At the same time, it is less expensive and much simpler. However, the power to sell the home lies with the trustee and not the lender. When comparing a mortgage vs deed of trust, you should understand another thing. In order for the trustee to be able to sell the property, he must be provided with adequate proof of delinquency on the part of the borrower by the lender.

The location of your property is going to determine what laws are applicable to your situation.  

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