The term “mortgage” is confusing because it can mean different things. Almost everyone who buys a home takes out a loan. Taking out a loan is the same thing as applying for a mortgage. But what is a Deed of Trust vs Mortgage?
No matter where you live when you take out a home loan, the lender places a lien on your property. The “lien” just means that you owe money and do not entirely own your home yet. In many states, you owe the lender, and this is called your “Mortgage.”
However, some states use a “Deed of Trust” as part of the loan process. In Texas, a deed of trust protects the mortgage loan. The title is held by the trustee rather than by a lienholder lender. A deed of trust protects the process of taking out a mortgage loan in Texas. In other states, there are only mortgage papers but no trustee.
What is a Deed of Trust?
The deed of trust is an agreement between 3 parties instead of 2. As the borrower, you take out a loan with the lender, but the trustee holds your lien.
A deed of trust is a legal framework where a neutral third party called the trustee holds the title of a home. The trustee has the legal title to the real estate until you ultimately pay off the loan. The trustee also manages the payments you make each month.
The trustee’s job is to act as a neutral 3rd party to the mortgage you took out with the lender. If you don’t make your payments as agreed upon in your loan contract, the trustee can start the foreclosure proceedings without taking you to court. The trustee can declare your loan in default, start the eviction process, and sell the property.
What is a Mortgage?
A mortgage is the legal framework of a home loan. A mortgage is between 2 parties: the lender and the borrower. The lender makes a mortgage agreement with you, the borrower, to make your payments based on the contracts that are part of the mortgage agreement. The lender owns the lien instead of a trustee holding the lien.
In a mortgage loan, if the lender wants to foreclose on you for non-payment, they must go through the court system to serve foreclosure papers. There is no trustee to manage difficulties between the buyer and lender. The court acts as a neutral 3rd party to ensure that the foreclosure is fair to you and the lender.
There is no need to go to court with the deed of trust because the trustee acts as the disinterested 3rd party. The trustee pulls the loan and calls for immediate payment if needed. The trustee starts any foreclosure process.
Deed of Trust vs Mortgage?
A deed of trust adds a layer of protection for the buyer and the lender. If the lender decides to change your interest rate midway through the loan, but the contract does not specify that the lender can legally do this, the trustee acts as a buffer between you and the lender. If there is a dispute, the trustee is a mediator.
The trustee also makes it easier for the lender to foreclose on you if you don’t pay your monthly payment as agreed. If you don’t pay your mortgage in Texas, you can enter into foreclosure in little more than a month.
The Bottom Line
Whether you have a traditional mortgage or a deed of trust, the truth is that if you don’t make your monthly payment, you can face foreclosure. In either lending system, there are companies that do not act ethically.
Real estate attorneys review your mortgage documents to make sure your long-term rights and obligations are fair. An experienced attorney is the only person you pay in a real estate transaction who is truly on your side and representing your interests and rights as a buyer.
Mortgage brokers get a commission from the lender. Real estate agents get a commission from the sellers. Lenders charge interest, fees, and other hidden charges that an inexperienced eye can miss on a casual read-through of a contract.
If a lender or trustee is taking advantage of you, work with an attorney to uphold your rights. Unscrupulous businesses prey on people who don’t know the law. With an experienced real estate attorney, you can fight back from a place of knowledge.
At Jarrett Law, we specialize in real estate transactions. We know how to help if you face foreclosure due to back taxes, HOA issues, title troubles, or deed of trust issues. Contact us for a free consultation to find out if you have a case. We want to help you in your journey and fight for your rights as a homeowner.
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