Mortgages and Deeds of Trust both represent a vested security interest in properties or real estate. However, the primary difference between these loans unfolds through mortgage and deed of trust litigation. To better understand the nuances of these documents, we’ll outline the characteristics of each type.
Deed of trust vs. mortgage: what’s the difference?
Homeowners may find themselves asking,“ what is a mortgage?” A mortgage is a contract representing the vested security interest in a property or real estate between the lender (mortgager) and the borrower (mortgagee). This contract binds the borrower to repay the lender the loan amount. The repayment includes additional fees and interest accumulation. In the event of foreclosure, the lender and the borrower enter mortgage litigation. Successful mortgage foreclosures result in a court judgment. In this court judgment, the lender may sell the property or real estate to regain their funds.
Homeowners may find themselves asking, “what is a deed of trust?” A deed of trust is a contract that represents the vested security interest in a property or real estate that exists. However, this interest is between three parties: the lender (mortgager), the borrower (mortgagee), and a trust. The trust is essentially a third party. This third party gives the lender (limited) power to sell a property in the event of (multiple) delinquent payments. The lender can do this without first going to court and receiving a judgment that grants permission to do so. Therefore, the trust primarily protects the lender from the cost and time of the foreclosure process in the event of nonpayment.
Most people think of homeownership as including a mortgage. However, 35 states use or have the option of using a deed of trust. The law limits the power that comes with deeds of trust. That is to say, the law requires individuals with a deed of trust to follow a set of guidelines to constitute foreclosure.
How to determine if you have a mortgage or a deed of trust
First, it’s best to review loan documents.
These documents determine if homeowners have a mortgage or a deed of trust that signifies their repayment plan to homeownership. Here, it should outline the terms of the loan.
Alternatively, contact your lender.
Speaking with your lender can be a simple way to verify whether a home loan is a mortgage or a deed of trust.
Fausett Law can help homeowners understand the difference between mortgages and deeds of trust. Moreover, we can help homeowners navigate mortgage litigation, deed of trust litigation, and how each of them works.
Fausett Law is a team of attorneys qualified to represent homeowners in mortgage litigation and deed of trust litigation. We can help you and your lender reach various solutions. These solutions include forbearance, repayment plans, and loan modification. For more information on navigating your mortgage agreement and other FAQ’s, visit us here. You can also give us a call at (630) 858-0090.
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