Difference Between a Deed & a Mortgage

Difference Between a Deed & a Mortgage
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A deed is a document used to transfer title to real property. A mortgage is a means of securing a payment obligation, by creating a lien on real property. However, there are types of documents, such as deeds of trust, which have characteristics of both a deed and a mortgage.

Characteristics of a Deed

Real property can only be transferred by use of a written instrument. A deed is the document that transfers ownership of real estate. In addition to stating the names of the new and old owners and how title will be held, the deed will contain a written description of the property being conveyed.

Characteristics of a Mortgage

A mortgage is a document used to secure the performance of an obligation. A mortgage creates a lien on property and gives the lender the right to take the property by foreclosure if the borrower defaults. Once the borrower pays the loan in full, the mortgage lien should be released.

Deeds to More Than One Owner

If property is to be owned by more than one person, the deed must describe their ownership interests. There are several ways people can own property together. Joint tenancy is ownership in equal shares. A joint tenancy can be with or without the right of survivorship. Right of survivorship means that upon the death of one owner, title automatically vests in the survivor. Tenancy by the entirety is a form of joint tenancy used for married couples.

Tenancy in common can be used for ownership with unequal interests. Tenants in common do not have rights of survivorship. Certain states, such as California, also have community property forms of ownership.

Deed of Trust

A deed of trust is a type of mortgage used in certain states, such as California. A deed of trust transfers title to a "trustee," to hold the property as security for a loan. If the borrower defaults on the loan, the trustee can sell the property without going to court and pay the lender from the proceeds. When the loan is paid off, title is transferred back to the owner.

Deed in lieu

A deed in lieu of foreclosure is used to transfer the title of mortgaged property to a lender to prevent foreclosure. Such a transfer could have serious tax and other legal consequences and should always be done with the assistance of an attorney.