What is the key difference between a mortgage and a deed of trust?

The key difference between a mortgage and a deed of trust lies in the structure and involvement of parties. In a mortgage, the transaction primarily involves two parties: the borrower (buyer) and the lender. The property serves as collateral for the loan, with the borrower directly responsible for repaying the debt.

In contrast, a deed of trust introduces a third-party trustee who holds the legal title to the property on behalf of the lender until the borrower fulfills their loan obligations. This trustee plays a crucial role in the event of a default, as they can initiate the foreclosure process on behalf of the lender without requiring judicial involvement, streamlining the process.

Understanding this difference is essential for recognizing how these financial instruments function and the implications they carry for both borrowers and lenders in real estate transactions.