A common question I see is: Who owns my home if I have a mortgage?
Many borrowers believe that when they purchases a property by obtaining mortgage financing, they also own their home.
Technically speaking, full ownership on a property is only happens once the mortgage loan amount has been paid in full.
To break this down in more detail, there are a few components of a mortgage:
A Promissory Note is a document signed by the borrower acknowledging their commitment to pay the mortgage back with interest in a specific period of time.
In addition to the terms of repayment, the Note also contains provisions concerning the rights of both parties involved in the agreement.
In some states, a Deed of Trust is used instead of a Mortgage Note.
The main difference is that on a Deed of Trust there is a Trustee, which the legal title is vested to in order to secure the repayment of the loan.
There are three parties involved with a Deed of Trust:
1) Trustor – This is the borrower
2) Trustee – This is the entity that holds “bare or legal” title, and is usually the title company which holds the Power of Sale in the event of default and reconveys the property once the Deed of Trust is paid in full.
3) Beneficiary – This is the lender that is getting repaid
Deeds of Trust are easier for lenders to foreclose on than a mortgage because there is no need for a judicial proceeding.
Mortgages on the other hand, have to go through judicial proceedings, which can be expensive and time consuming.
Time frame for foreclosures of a deed of trust is 3 months after the notice of default compared to a year for mortgages.
Basically, until you have your promissory note paid in full, you are not the only one with an ownership interest in your property.