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Deeds of Trust
from: Mortgage & Debt FactsDeeds of trust are very commonly used in the purchase of a home or real estate. Many may not be aware of the fact that deeds of trust are different from mortgages. Although they may be similar, they are still not the same thing. The main difference between deeds of trust and mortgages is that deeds of trust involve a trustee that handles everything. A mortgage is the actual description of the real estate that you own or are purchasing. If you had to take out a loan to purchase the property, the lender will have a lien on your property until the loan is paid off. A lien means that the lender and you both own the property until the loan is paid in full. If you default on the loan agreement, the lender can foreclose and take the property from you and sell it as they see fit.
Deeds of trust, which is the security on your loan, are the documents that are recorded either at a title company or some other office of public records. Deeds of trust involve three different parties. They involve you, the buyer and often referred to as the trustor. They involve the beneficiary, which is the bank or lender and they involve the trustee. The trustee is the entity or person that holds the title of the property until the loan is paid off. In most cases, the title is held by a title company, although occasionally the seller of the property may also hold the title or deed.
Whether you are the buyer or the seller, deeds of trust must contain certain information. Most importantly, the must contain the amount of the loan, the parties involved in the transaction and the legal description of the property or real estate that is being used as collateral for the mortgage. Legal descriptions must be very detailed and extremely accurate. Many mortgage loans that found themselves in a court of loan for default of payment were questioned because of an inaccuracy of the legal description. In some of these cases, the borrower was not able to foreclose on the property because of a small discrepancy in the legal description.
Other important information that must be on deeds of trust are the dates the loan was started as well as the maturity date, any provisions or requirements of the mortgage, late fee amounts, acceleration clauses, prepayment penalties, interest rate terms and all possible legal procedures.
The trustee is the one that will handle any problems involving the deeds of trust such as late payments, taking care of the satisfaction when the loan is paid up, foreclose for default of payments and holding the title.
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