Both documents secure a loan with real estate. A mortgage is an agreement between two parties, the borrower and the lender, while a deed of trust adds a third: a neutral trustee with the power to sell the property if the loan goes unpaid. In practice the difference shows mainly in how a default is handled.
Which one you hold
The state where the property sits, and local custom there, largely settled the question before your closing. Look at the title of the recorded document from that closing. It will read “Mortgage” or “Deed of Trust”, or in a few places another name such as “Security Deed”. If what you signed was a single contract under which you kept the deed, you hold a land contract, another of the note types, and neither column below describes it.
Whichever it is, it sits alongside a promissory note, the signed promise to repay that creates the debt. The mortgage or deed of trust is the security instrument: recorded with the county, it ties the promise to a specific property and gives the lender a lien, a legal claim against that property. A seller who carried the financing holds both the note and the instrument.
Side by side
| Mortgage | Deed of trust | |
|---|---|---|
| Parties | Borrower and lender | Borrower, lender and trustee |
| What the borrower is called | Mortgagor | Trustor or grantor |
| What the lender is called | Mortgagee | Beneficiary |
| How a default is commonly handled | Through the courts | By a trustee’s sale outside court |
| When the loan is paid off | Lender records a release or satisfaction | Trustee records a reconveyance |
| How the lender’s position is sold | Assignment of mortgage | Assignment of deed of trust |
A general description. Each state’s law decides which instrument is used there and how it is enforced.
The trustee’s job
A trustee is commonly a title company, an escrow company or an attorney with no stake in the loan. The role is narrow: to sell the property under the power of sale written into the deed of trust if the borrower defaults, and to release the lien once the loan is paid off.
Default: a court case or a trustee’s sale
A lender foreclosing on a mortgage commonly has to file a lawsuit and obtain a court order, which is called judicial foreclosure. Under a deed of trust, the trustee can commonly sell the property after the required notices with no lawsuit, which is called non-judicial foreclosure.
That is the general pattern, and states depart from it. Some allow both instruments, and some mortgages carry a power of sale of their own. Each state sets the steps, the notices and the borrower’s protections, so anyone facing an actual default should speak with a local attorney.
What it does to the price of a note
The effect is small and indirect. A note buyer prices what would happen if the payer stopped. Where recovering the property means a court case, the buyer expects more time and legal cost and may build that into the offer, and where a trustee’s sale is available, the buyer expects a shorter road.
The interest rate, the payments left, the payer’s record and the equity in the property move what a note is worth far more than the name on the security instrument does. Have the recorded instrument in hand when you fill in the note pricing form, because a buyer will ask which kind it is, and expect the other answers on the form to count for more.
The assignment when you sell
Selling the note involves the same steps under either instrument, with different names on the forms. You sign the note over to the buyer and sign an assignment of the mortgage or of the deed of trust, which is then recorded.
Before any of that, check that the instrument from your own closing was recorded and that the names on it match the names on the note. A mismatch is easier to correct now than in the middle of a sale.
Related questions
Can I sell my note if it is secured by a deed of trust?
Yes. Notes secured by either instrument are bought and sold. You endorse the note to the buyer and sign an assignment of the deed of trust, which is recorded in the county where the property sits.
Is a deed of trust the same as a deed?
No. A deed transfers ownership of a property. A deed of trust secures a loan against it. The names are similar and the jobs are different.
Does the trustee have to approve the sale of my note?
Generally no. The trustee's role is limited to default and payoff. Check the wording of your own documents, and ask a title company or attorney if anything in them is unclear.