How does a mortgage differ from a trust deed?

A mortgage and a trust deed are both instruments used to secure a loan for the purchase of real property, but they differ in the number of parties involved in the transaction.

In a mortgage, there are two primary parties: the borrower (mortgagor) and the lender (mortgagee). The mortgagor signs a mortgage agreement, pledging the property as collateral for the loan and retaining possession of the property while making payments.

In contrast, a trust deed involves three parties: the borrower (trustor), the lender (beneficiary), and an intermediary known as the trustee. In this arrangement, the borrower transfers legal title of the property to the trustee, who holds it on behalf of the lender until the loan is paid off. Once the loan is satisfied, the trustee reconveys the title back to the borrower.

Understanding this distinction in the number of parties clarifies the different mechanisms for securing real estate loans and the roles each party plays throughout the process.