Significance

• The significance or purpose of a mortgage a deed of trust is protection for the lender. Both are instruments that tie the home as security for the loan have made on the property to the borrower.
  
  

Geography

• State laws determine whether a mortgage or deed of trust is signed by the borrower securing the home to the loan. In states that use title theory as a basis for real estate law, a mortgage is the security instrument signed by the borrower to protect the lender's interest. In these states, the mortgage creates a lien on the home, but the ownership or title of the property belongs to the borrower. When the borrower pays off the mortgage, the lien is removed from the property and the title remains in the hands of the borrower. Title theory states are those that include a clause in the mortgage instrument that states if the borrower default on the loan, then the ownership of the property becomes that of the lender. In states that do not follow title theory real estate law, the mortgage instrument states that when the borrower pays off the lender, then the ownership or title of the property goes to the borrower. In states where modified lien theory real estate laws exist, the lender still has rights to the property if the borrower defaults, but the title is held by the borrower until then.
  
  

Basics

• The number of parties involved in the real estate transaction is the main difference between a mortgage and deed of trust. When a deed of trust is used as the borrowing instrument, three parties are involved in the transaction, which is the borrower, the lender and a trustee. When a mortgage is used as the borrowing instrument, two parties are involved in the real estate transaction, which is the borrower and the lender.
  
  

Identification

• Another difference between a deed of trust and mortgage is whom the title is given to. When a deed of trust is used, the title of the property is held by a trustee, who holds the title of the property until the borrower pays off the lender. The most common types of trustees for deeds of trust include title companies, escrow companies and banks.
  
  

Effects

• When a borrower defaults on a loan and foreclosure proceedings are begun by the lender, the process is different depending on whether a mortgage or deed of trust instrument was used. Again, state law dictates how foreclosure proceedings occur, but a deed of trust foreclosure typically has a shorter time frame than a mortgage.