Debt Free

Both a deed of trust loan and a mortgage loan are loans used to purchase real estate. It all comes down to where you live. In some states you’ll use a deed of trust loan, in others, you’ll get a mortgage. What are the actual differences between them? Read on…… 

They are both technically security instruments used to finance property but the difference comes down to which state you live in, or more acurately, wher the property is located. Something else to consider is that a mortgage is treated differently depending upon weather the property is in a title theory state or a lien theory state. In a lien theory state the buyer holds the title during the term of the loan, in a title theory state, the lender keeps the title. Got it? Great, now it’s clear as mud.

 

Mortgage – 2 parties are involved; the creditor and the debtor.

Deed of trust loan – 3 parties are involved; the creditor, the debtor, and a trustee. The purpose of the trustee is to hold title to the property until the debt is paid in full. Depending upon the state in which the property is located the trustee can be either an attorney or a representative of a title company that deals in such matters.

 

Mortgage – When a property is foreclosed upon due to delinquent payments there is a court proceeding called a judicial foreclosure. After this is complete, the mortgage holder may sell the property and claim their portion of the proceeds.

Deed of trust loan – In most cases foreclosure is much simpler when a deed of trust loan is involved. The lender can simply document the delinquency to the trustee and the trustee can then sell the property to satisfy the outstanding loan balance. No messy and expensive court proceedings are required.

This will only matter to you if you live close to the border of two states that use different system, or are a real estate investor on a national scale. That’s because you can’t choose which you’d like to choose. That was done for you, a long time ago, by the state in which the property is located. Check with your state to determine how they handle real estate financing transactions.

 

Have a great 4th of July Independence Holiday. The Declaration was signed on the 4th, but Independence was actually declared on July 2nd. Now there are two reasons to celebrate. Be Safe!