A mortgage is a legal agreement in which the owner of a property gives another person their property to keep as collateral until they pay off a debt. A deed acts as legal evidence of any type of transfer of ownership from one party to another. People tend to use the terms “deed” and “mortgage,” and they use them interchangeably when talking about owning a property. But what really is the difference? Well, there is actually a clear difference between a deed and a mortgage, and in fact, there is an additional document that is often not mentioned, but which is the most important thing.
Therefore, as a general rule, if someone is in the deed, they must be in the mortgage. But just because they're on the mortgage doesn't mean they're on the note. For example, many times one spouse may have bad credit, so it's not in the promissory note (lenders sometimes say “they're not on the loan), but both spouses are in the Deed, so both spouses have to be in the mortgage. It's important to recognize the difference between a deed, a promissory note and a mortgage, because they definitely have different legal implications.
For the average person, there is no difference between a mortgage and a trust deed. Whether you have a mortgage or a trust deed, it depends solely on the location. In general terms, the east side of the country uses mortgages, while the western side uses trust deeds. The reason for this difference comes from theories within property law.
The use of these theories varies between jurisdictions, resulting in this difference. The technical difference between the two boils down to who has a stake in your property. With a trust deed, a trustee owns the interest. With a mortgage, the bank has an interest.
This means that if you have a mortgage, you are giving your money directly to the bank, rather than having a trustee hold it until the bank or the courts need it. Similarities are everywhere within these two things. Both documents guarantee a loan on which the borrower must repay. Under both a mortgage and a trust deed, if the borrower is unable to repay the money, the lender has the right to sell the property.
Both documents allow one party to borrow money to own a property, while allowing another party the right to sell. The only case where differences arise is in the case of foreclosure. With a mortgage, if the borrower is unable to pay, the mortgage is given to the courts. The lender can file a lawsuit.
This is known as judicial foreclosure. In the case of a trust deed, foreclosure doesn't have to go through the courts. This is known as non-judicial foreclosure. This type of foreclosure is much faster and more cost-effective.
While most states have mortgages or trust deeds, there are some states that allow you to choose which one is best for you. These states include Alabama, Arizona, Arkansas, Illinois, Kentucky, Maryland, Michigan, and Montana. For all other states, understanding the differences between a mortgage and a trust deed is just a matter of procedure. If you have any other questions about mortgages, trust deeds, differences, or how they work, contact an experienced real estate attorney at Griffin Fletcher & Herndon LLP today.
Although it is common to hear that the mortgage and the trust deed are used interchangeably, they are two different types of contracts. A mortgage is a direct contract between two parties: the borrower and the lender. The borrower owns the title to the property and promises it to the lender as security for the loan. With a trust deed, the borrower does not own the title to the property.
Instead, a third party, known as a trustee, has a temporary retention of title and will only give the title to the borrower, known as the trust, when the loan is repaid in full. This difference between mortgages and trust deeds becomes very important if a borrower fails to repay the loan and the lender needs to foreclose. In the U.S. UU.
The big difference between these two real estate documents is that a trust deed requires a third party (a trustee), whereas a mortgage doesn't. In its most basic form, both a trust deed and a mortgage function as liens against title to a property, or as a security right, often tied to a loan of some kind. Judicial foreclosures, which go through the state court system, are typical in states that use mortgages as security tools. Mortgages require the use of a judicial foreclosure process, while trust deeds are used in states that allow non-judicial foreclosure.
Mortgage transfer fraud occurs when criminals convince a borrower to transfer funds to a fake account during the closing process. In these states, the terms of mortgage contracts and state laws allow lenders to conduct out-of-court foreclosures. The basic difference between a mortgage as a security instrument and a trust deed is that in a trust deed there are three parties involved, the borrower, the lender and a trustee, whereas in a mortgage document there are only two parties involved, the borrower and the lender. Depending on where you live, you probably signed a mortgage or trust deed, which is similar to a mortgage, when you applied for a loan to buy your home.
Both a trust deed and a mortgage are linked to your mortgage loan and involve an agreement between you and your lender. Under lien theory, the mortgage creates a lien only on the property and the title remains in the hands of the borrower. The mortgage or trust deed gives the lender the right to foreclose if you fail to make payments or otherwise violate the loan agreement. In addition, some states only allow one deed of trust, while others only allow a mortgage, and a couple allows both.
From a borrower's perspective, it might be better to have a mortgage if you don't pay your home loan. The document that transfers a mortgage from one entity to another is called a mortgage assignment. . .
