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What’s the Difference Between a Mortgage and a Deed of Trust? Here’s What Homebuyers Should Know

What’s the Difference Between a Mortgage and a Deed of Trust? Here’s What Homebuyers Should Know


What’s the Difference Between a Mortgage and a Deed of Trust? Here’s What Homebuyers Should Know

There are numerous phrases and terms you’ll hear during the home-buying process that may be unfamiliar. While you’ve undoubtedly heard the term “mortgage,” you may not realize how it differs from a deed of trust. Let’s look at the differences and talk about when to use one over the other.

Why Is There Confusion?

Both mortgages and deeds of trust are legal terms used in the real estate market. Both are contracts that deal with lenders being able to secure that a loan will be repaid. In short, the two terms serve the same purpose. However, they are different animals.

What Is a Mortgage?

Mortgages are agreements between two parties. When buyers want to use a loan to pay for a property, they ask lenders for a mortgage. The terms state buyers will pay lenders back over time until the loan is satisfied. Mortgages are secured debts and use the property as collateral.

What Is a Deed of Trust?

A deed of trust is an agreement among three parties: the beneficiary (lender), trustor (borrower), and the trustee. The trustee is a neutral third party who releases the loan once it’s paid in full. They can also start a foreclosure on a property if the trustor fails to make timely payments.

How Do They Differ?

There a few distinct differences between a mortgage and a deed of trust. Here are three ways they vary.

  • Number of parties involved. A mortgage only involves the buyer and lender. A deed of trust adds the trustee to the mix.
  • The foreclosure process is different. When a borrower fails to pay a mortgage loan, the lender starts a judicial foreclosure. When a trust doesn’t fulfill the terms in a deed of trust, the trustee initiates a nonjudicial foreclosure.
  • The foreclosures cost different amounts. When a property with a mortgage is foreclosed upon, the lender gets a deficiency judgment. This process can take a long time and be costly. In contrast, with a deed of trust, the trustee has the authority to sell the property and settle the debts without going to court. This process usually goes faster and is less expensive than what’s required by a mortgage.

When Should You Use One Over the Other?

Your state will decide which one you use to finance your property. Some states require mortgages while others only use deeds of trust.

The broad goal of both contracts is to nail down financing to purchase a property. However, deeds of trust and mortgages aren’t terms that should be used interchangeably. Talking to your lender will help you sort out which one you’ll use for your mortgage and how the process works.

Are you interested in purchasing a new home, or refinancing your existing one? MIG can help! Contact one of our professional loan officers today to hear about your options.

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Mortgage Investors Group, based in Tennessee, offers residential financing in a number of states in the southeast, See MIG Service Areas. Terms and conditions to apply to home financing. We want to share with you the loan terms vary based on several characteristics and your financial profile. These include but are not limited to loan program, loan purpose, occupancy, credit history, credit score, assets, and other criteria per loan type. The repayment terms and interest rate may vary from time to time. The terms represented here are based on certain assumptions outlined below and/or noted on the loan outline page. Additional details concerning privacy, program disclosures, licensing specifics may be found at migonline.com Legal Information.

MIG Loan Officers will help gather the information needed for an individual assessment to provide home financing which matches the loan characteristics with your home financing needs based on your financial profile, when you are ready to begin a full loan application. For estimates and general information before that step, the basis for which the mortgage financing information are as follows:

  • Rates are subject to change at any time.
  • Rate locks are available at current terms for 30 to 180 days based on program type, credit profile, property location, etc. which will affect the available rate and term.
  • Rate locks are available at current terms for 30 to 180 days based on program type, credit profile, property location, etc. which will affect the available rate and term.
  • Payments will vary based on program selection, current rates, property location, etc.
  • Not all programs are available in all states.
  • Some loan programs may not be available to first time home buyers.
  • Terms and conditions apply, which may include restrictions or limits per loan program.
  • Information is generally based on primary residence occupancy with no cash out when refinancing.
  • Unless otherwise stated, terms shown are estimates based in part on credit score of 700 or higher; owner occupancy, escrow account is established for taxes and insurance(s); debt-to-income ratio no higher than 43.0%; PMI applies to conventional loan programs over 80.0% LTV; VA,FHA & RD require insuring fees included in loan and/or payment; fixed rate, 30 year term.

An MIG Loan Officer is available to help with your financial details to determine which characteristics apply to your situation for a personalized look into which loan program best fits your home financing needs. Please use the Find a Loan Officer link or reach out to Mortgage Investors Group at 800-489-8910. Equal Housing Lender 1.2020