When it comes to financing a property, there are two common types of agreements that can be used: a mortgage and a deed of trust. While both of these agreements involve borrowing money against a property, there are some key differences between them. In this blog post, we'll explore the difference between a mortgage and a deed of trust and what you need to know about each of them.

What is a Mortgage?

A mortgage is a legal agreement between a borrower and a lender that involves the transfer of an interest in a property from the borrower to the lender as security for the loan. Essentially, the borrower agrees to give the lender a lien on the property in exchange for the loan. This lien is recorded in the county where the property is located and is removed once the loan is paid off in full.

One key aspect of a mortgage is that it involves a two-party agreement between the borrower and the lender. The lender has the right to foreclose on the property in the event of default, but they must go through a judicial process to do so. This process can be lengthy and costly for both parties.

States That Use a Mortgage:

Connecticut, Delaware, Florida, Illinois, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Nebraska, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, West Virginia, Washington, D.C.

What is a Deed of Trust?

A deed of trust, on the other hand, is a three-party agreement between the borrower, the lender, and a trustee. The borrower transfers an interest in the property to the trustee, who holds it as security for the loan. If the borrower defaults on the loan, the trustee has the power to foreclose on the property and sell it at auction to repay the loan.

One key difference between a mortgage and a deed of trust is the foreclosure process. With a deed of trust, the foreclosure process is typically much faster and less costly than with a mortgage. This is because the trustee has the power to sell the property without going through the judicial process.

States That Use a Deed of Trust:

Alaska, Arizona, California, Colorado, Idaho, Illinois, Mississippi, Missouri, Montana, Nevada, North Dakota, Oregon, Texas, Utah, Washington, Wyoming.

Which is Right for You?

When it comes to choosing between a mortgage and a deed of trust, there is no one-size-fits-all answer. Both options have their pros and cons, and the best choice for you will depend on your unique circumstances including the state of the subject property

As a hard money lending expert, I understand the nuances of both mortgages and deeds of trust and can help you determine which option is right for your specific needs. Whether you're looking to purchase a residential or commercial property, I can provide customized lending solutions that meet your unique needs and help you achieve your real estate investment goals.