Mortgage vs. Deed of Trust

I am sure that the majority of readers already know what a mortgage is - a document giving a bank collateral for a loan use to buy a home and allowing foreclosure if the payments are not met. But in some states, the document is not called a mortgage, but a deed of trust (DOT). What’s the difference?

There are two parties to a mortgage, the lender (bank) and the borrower (homeowner). In a DOT there are three parties:

• The lender
• The borrower
• and the Trustee

In a DOT, the trustee actually holds legal title to the property for the benefit of the lender until the loan is paid in full. So, neither the bank or the homeowner is the legal  owner of the house while the DOT is in operation. The homeowner has what is called “equitable title” in the property and this allows for the benefits of use of the property and quiet enjoyment.

Generally, a DOT will allow for a faster foreclosure than in the judicial foreclosure required when there is a mortgage involved.

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