Montana Real Estate License Online Course - MONTANA Approved School: RealEstateCE.com
3.0 hours Contracts and Leasing Course Syllabus
3.0 Continuing Education Hours.
What is the difference between a mortgage and a deed of trust?
The fundamental difference between deeds of trust and mortgages is the procedure that is followed if the borrower does not honor their obligation to pay off the loan and defaults on the loan. Whether a property will have a deed of trust or a mortgage depends on the state in which it is located. With a deed of trust, if the homeowner does not pay the loan, the foreclosure process is usually much faster and less complicated than the formal court foreclosure process.
A mortgage involves a relationship between two parties the lender and the borrower/homeowner. If a borrower defaults, the lender must go through a judicial foreclosure in a court of law where the property is located. If the court rules that the lender can foreclose, the property is sold at auction. The highest bidder on the property receives a certificate of sale.
A deed of trust involves three parties the homeowner, the lender, and the title insurance company holding legal title to the real estate until the loan is fully repaid. If the homeowner does not honor their obligation, the lender can foreclose on the property with a non-judicial foreclosure. The clause in a deed of trust that allows the lender to take this action is called a power of sale clause. The lender must first serve the borrower with a notice of default. Next, the borrower is served with a notice of sale. After these notices, the lender can sell the property at auction which is called a trustee’s sale. The highest bidder on the property will receive a Trustee’s Deed.
This course covers the difference between Mortgages and Deeds of Trust. Promissory Notes and the way each instrument functions to protect the lender’s interest.