One of the common misconceptions of most people is that they refer to a home loan as a mortgage, but the reality is completely opposite, and it is not the case.
The mortgage is just not a loan agreement and is a promissory note and a contract between a borrower and the lender that has a promise to repay the loan or payment to the person.
Some states use the mortgage for the loan agreement, while many others use trust deeds or some similar-sounding contracts.
While it may be the same that mortgage and Trust Deed Scotland are similar agreements where a borrower has to return the money to the lender and put the title of the real estate after that, both these contracts have some major differences that you would want to know.
So, read more below t0o identify their difference:
What Is Mortgage?
When you take a loan to buy some real estate property, you can either sign a trust deed or a mortgage, depending on which state you live in.
In case you are going to sign up for a mortgage loan agreement, there will be majorly two parties involved that are:
- The lender, known as the mortgagee.
- The borrower, known as the mortgagor.
The mortgage transfers between the banks and the other common entities that are present.
When mortgage money is transferred from one person to the other, it is properly documented and is also often recorded in the main country records.
This legal document is then later used to transfer the mortgage money from one party to the other and is commonly known as the assignment of mortgage.
The mortgage agreement gives the lender the right to sell the secured real estate property with the help of the foreclosures procedure.
If the mortgagor or the borrower is not able to make the decided payment or tries to breach the loan agreement, then foreclosures help the mortgagee to sell the property.
The judicial foreclosures are typical in many states that have mortgages as the security instrument, and they must go through the state’s court system.
However, in some states, foreclosures are also commonly nonjudicial, and in these states, the terms of the mortgage agreement allow the lender to have an out-of-court foreclosure.
What Is Trust Deed?
A trust deed is similar to a mortgage, and it is used to pledge a real estate property to secure a loan.
This is a legal document that is used instead of a mortgage in many states, and contrary to mortgage, it involves three parties in it:
- The lender is known as the beneficiary.
- The borrower is known as the trustor.
- The independent third party known as trustee.
The trustee who is an independent third party usually holds a legal or a bare title to the property.
The primary function of a trustee is to sell the real estate at a public auction in case the trustee is not able to pay back to the beneficiary.
Trust Deeds Transfer
Just like mortgages, when a trust deed is transferred from one party to another, the document is generally recorded in the country records.
These transfers of trust deeds and mortgages are both known as assignments.
Trust Deed Foreclosures
Normally, the states that use trust deeds typically use nonjudicial foreclosures; this means that the lender can foreclose without even going to the court if the trust deed contains the power of sale clause.
The state law lays out the procedural requirements for the nonjudicial foreclosures in the deed of trust.
Non Judicial foreclosures are preferred in deeds of trust because they are way much quicker than judicial foreclosures.