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What Is The Real Difference Between A Deed Of Trust And A Mortgage

Aug 17, 2007
A mortgage is not interchangeable with a home loan. Under certain conditions, for a certain amount of money borrowers will sign a promissory note to the lender. The lender requires the borrower to sign a mortgage, to legally secure the lender. Mortgages are documents written to protect the lender's interest in your property; hence a mortgage is not interchangeable with a home loan.

The mortgage creates a lien on your property, which is put into records to serve as security to the lender that you will pay back the borrowed money. Hence, the mortgage is between you and the lender. The lender cannot transfer possession to another party until you pay the debt and release the lien. Even if your loan is backed up by a mortgage, only you have all the rights of ownership to the property.

If the borrower does not pay what they are supposed to, it gives the lender the rights to protect their interests and foreclose on the property, which will secure their money back. Foreclosure generally goes through the judicial foreclosure process when a mortgage is used as lenders security, and it could take up to four months in this court system. In more than half of the states in the United States, mortgages are used as security measures for loans. Other states may use a deed of trust. Both processes have significant differences, but serve the same purpose.

A deed of trust is put into records to put a lien on your property, just a like a mortgage. Unlike a mortgage, however, it goes between you, the lender, and a "trustee". A trustee is a third party who holds a temporary title until the lien is paid. The trustee should be a neutral party favoring neither the borrower nor the lender, in case a problem arises. Common third parties are attorneys, title insurance companies, or an escrow company. Trustees are not the ones who take over your property.

Deeds of trust are only revoked once the debt to the lender is paid off. In which case, the trustee issues a release of the deed, and the new record is made that the loan is paid, and the lender surrenders its interest.

Deed of trusts and mortgage differences only affect homeowners when foreclosing becomes an issue. In this case, the trustee sells your home once your loan becomes delinquent. Once the lender provides the trustee with proof of this type of occurrence, the request to foreclose begins.

Depending on where you live, state law determines how your loan is secured to begin with (either mortgage or deed of trust), or the process of foreclosure. It is, therefore, important to understand the type of lien will secure the debt of your home. Do plenty of research and make sure all your questions are answered before signing anything. Remember, lenders will foreclose your home to protect their interests, so just be certain that you are protecting yours as well by doing research.
About the Author
Gregg Hall is an author living in Navarre Florida. Find more about this as well as Home Mortgage Refinance at http://www.mortgageandrefinancenow.com
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