If you’re considering entering into a mortgage or real estate transaction in the state of Texas such as a Texas deed of trust, it’s important that you be apprised of the details involving a deed of trust as well as the laws in the state of Texas. A deed of trust is a legal document describing the terms of your loan and allows the lender to repossess and sell your property if you do not pay on your loan as promised.
A Texas deed of trust is like a mortgage with the difference being that a deed of trust involved a trustee, who is usually a title company, as a third party acting on behalf of the lender. A mortgage, on the other hand, involves only the lender and borrower.
It’s important to know the laws of each state involving real estate purchases and loans. Some states deal in mortgages but not deed of trusts such as Alabama, Connecticut, South Carolina and others. Some states deal in deed of trusts but not mortgages like Alaska, Arizona, Virginia, North Carolina and others. There are still other states that deal in both of them. In Texas, deed of trust and mortgages are both used. A Texas deed of trust is also called a trust deed.
In Texas, a deed of trust is a lot like a mortgage with the exception of the third party, known as a trustee that is involved in the transaction. The trustee is usually a title company that works on behalf of the lender. Similar to a mortgage is the fact that, by signing, you are giving ownership of your property to the trustee until your loan is paid in full. The original deed of trust is held by the trustee until the loan is paid offer. If you fail to make your payments on time in Texas, the deed of trust is, in effect, giving the trustee right and option to foreclose on your home or property.
This is another similarity between the Texas deed of trust and Texas mortgage. However, with a mortgage they have to take you to court before they can begin foreclosure, whereas with a deed of trust, they can foreclose without taking you to court.
With a Texas deed of trust, if you do not make the payments on time, the trustee has the right to sell your property and give the proceeds to the lender. They call this right “foreclosure by power of sale”. If there is any leftover money after the lender is paid, it will go to the borrower.
Unlike a foreclosure of a mortgage, which is dictated by the court judicial system, foreclosure of a deed of trust is less secure for the person purchasing the property. In Texas, deed of trust laws may vary from other states and should be observed by all parties involved in the transaction.