Deeds of trust are very commonly used in the purchase of a home or real estate. Many may not be aware of the fact that deeds of trust are different from mortgages. Although they may be similar, they are still not the same thing. The main difference between deeds of trust and mortgages is that deeds of trust involve a trustee that handles everything. A mortgage is the actual description of the real estate that you own or are purchasing. If you had to take out a loan to purchase the property, the lender will have a lien on your property until the loan is paid off. A lien means that the lender and you both own the property until the loan is paid in full. If you default on the loan agreement, the lender can foreclose and take the property from you and sell it as they see fit.
Deeds of trust, which is the security on your loan, are the documents that are recorded either at a title company or some other office of public records. Deeds of trust involve three different parties. They involve you, the buyer and often referred to as the trustor. They involve the beneficiary, which is the bank or lender and they involve the trustee. The trustee is the entity or person that holds the title of the property until the loan is paid off. In most cases, the title is held by a title company, although occasionally the seller of the property may also hold the title or deed.
Whether you are the buyer or the seller, deeds of trust must contain certain information. Most importantly, the must contain the amount of the loan, the parties involved in the transaction and the legal description of the property or real estate that is being used as collateral for the mortgage. Legal descriptions must be very detailed and extremely accurate. Many mortgage loans that found themselves in a court of loan for default of payment were questioned because of an inaccuracy of the legal description. In some of these cases, the borrower was not able to foreclose on the property because of a small discrepancy in the legal description.
Other important information that must be on deeds of trust are the dates the loan was started as well as the maturity date, any provisions or requirements of the mortgage, late fee amounts, acceleration clauses, prepayment penalties, interest rate terms and all possible legal procedures.
The trustee is the one that will handle any problems involving the deeds of trust such as late payments, taking care of the satisfaction when the loan is paid up, foreclose for default of payments and holding the title.
When owning a home it is important to be familiar with and understand the different terms and documents that are used in matters of real estate law. These documents vary state to state and it is wise to do significant research into the real estate law of your state before buying a home. The most common difference of real estate documentation is, if the state uses mortgages or a Deed of Trust.
A Deed of Trust is much like a mortgage expect for two main differences. The Deed of Trust involves three parties and makes the process of foreclosure quicker and easier.
When home owners take out a mortgage they make a deal between themselves and the lender. The deed of the home remains in the possession of the home owner throughout the mortgage proceedings. If the home owner defaults in payment or does not maintain his end of the mortgage agreement, the lender will have to go through the rather lengthy procedure of foreclosure. Mortgages are taken out as a way to secure debt against the home or for other reasons that will depend upon the home owner and their unique situation. Mortgages are made between two people, the lender and the home owner
A Deed of Trust is different then a mortgage in that it requires three parties; the homeowner, lender, and the trustee. The trustee is responsible for holding the title until the initial agreement is fulfilled, either by the home owner completing all of the payments or the lender having to foreclose on the property. The process of foreclosure on a Deed of Trust home is an easier process then a home with a mortgage.
If an owner with a Deed of Trust is no longer able to make payments on the home then the lender can begin foreclosure procedures. This does not involve the courts as it does with the judicial foreclosure, which is used for mortgages. Such a quick and easy foreclosure is often cheaper and allows the lender to regain any losses accrued at an earlier date.
The differences between mortgages and Deeds of Trust may seem negligible but the differences that do exist can be of great importance to home owners. Before buying a home see if your state uses mortgages or Deeds of Trust. If you are uncomfortable with a mortgage then do not buy a home in a state that does not used Deeds of Trust. The same is true if you are uncomfortable with Deeds of Trust. You can not choose which document you get to use so find out which states use one or the other.
If you are going to have a Deed of Trust make sure you understand your legal rights and obligations to avoid having your home foreclosed. Unlike judicial foreclosures, the lender will not have to take you to court first and so you may have very little time to fight the proceedings.
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