What are the major differences between a mortgage and a deed of trust?

Whether you have a deed of trust or a mortgage, they both serve to assure that a loan is repaid, either to a lender or an individual person. A mortgage only involves two parties – the borrower and the lender. A deed of trust adds an additional party, a trustee, who holds the home’s title until the loan is repaid.

Can a trust deed be used in a land sale contract?

The fact that the buyer under a land sale contract has “equitable title” as opposed to “legal title” when the trust deed is used, means very little in legal terms today. Note and Trust Deed. The seller’s primary remedy upon a buyer’s default is a statutory, non-judicial foreclosure.

What does it mean to have a first trust deed?

A first trust deed is a mortgage that has priority over all other mortgages or trust deeds. This simply means that the first trust deed was recorded before any other liens, encumbrances or trust deeds involving your property.

When to invest in a trust deed investment?

You need to be willing to stick with your investment until the borrower pays off the loan, or, in case of default, until you have foreclosed and sold the underlying property. With Trust Deed investing there is little chance for capital appreciation.

When to use a trust deed or promissory note?

Almost all agreements, including promissory notes and trust deeds, are “contracts” if they contain the necessary legal elements. The term “land sale contract” is used specifically to designate a contract between a seller and buyer that secures a repayment obligation for the purchase price.

When do you need a first trust deed?

When a mortgage lender extends you the money to purchase your home, it requires a security interest in your property that takes priority over all others. To secure its seniority, it obtains a first trust deed on your property. In the event you default on your mortgage loan, the first trust deed ensures your lender’s…

What does it mean to invest in a trust deed?

Trust deed investing is simply investing in loans secured by real estate. Most trust deed investments are relatively short term loans (maturity under five years, with many loans two years or less) made to professional real estate investors.

What is margin of safety in trust deed investing?

The margin of safety is the difference between the loan amount, and the value of the underlying property. The core concept of trust deed investing is that if the borrower does not perform, the lender can foreclose on the property and sell it to recoup the investment, plus any past due interest.

Where can I find a deed of trust?

A deed of trust is a legal document that is the security for a real estate loan. The document itself is recorded with the county recorder or registrar of titles in the county where the real estate is located.