What's the difference between a security deed and a trust deed?

Question

What's the difference between a security deed and a trust deed?

Answer

A security deed functions in a similar fashion as a mortgage.  The security deed is an interest in real estate which gives legal title of property to the lender of the mortgage for the term of the mortgage note.  Trust deed is a written instrument legally conveying property to a trustee often used to secure an obligation such as a mortgage or promissory note.  In other words, the two deeds are the same.  The security deed may be known by several different names including:

  • Deed to secure a debt;
  • Trust deed; and,
  • Land contract.

They are terms used when a promissory note is secured by property or real estate.  The one major difference in some areas between the two is that the security deed is held by the lender whereas a trust deed is usually held by a third party.  Additionally, the difference between the deeds (either name) and a mortgage is that the foreclosure where a security deed is involved is much quicker than simply where the bank holds a mortgage on the property.  The mortgage requires a judicial action for foreclosure to take place; while the security or trust deed is a nonjudicial action where no court is involved.  It is only the stipulations of the deed that are important.  Therefore, these can be done very quickly.

If the properties are foreclosed on, the mortgager can go after you for the difference between the auction sale of the property and the amount of the mortgage.  Where a security deed is involved, the holder of the deed can only get the amount of the sale, and if there is a shortfall, the deed holder cannot get any more.

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