Deed of Trust vs. Mortgage
Published: 04/30/25
Understanding the Basics: Mortgage vs. Deed of Trust
When financing a home purchase, the agreement securing the loan is typically either a mortgage or a deed of trust.
While both serve the same fundamental purpose—providing security for the lender in case the borrower defaults—they differ significantly in their structure and the foreclosure process.
Understanding these differences is crucial, especially as the usage varies by state (Illinois primarily uses mortgages).
A mortgage involves two parties: the borrower (mortgagor) and the lender (mortgagee). The borrower retains title to the property, but the lender holds a lien. If the borrower defaults, the lender must go through a judicial foreclosure process, meaning they have to file a lawsuit and get a court order to sell the property.
A deed of trust involves three parties: the borrower (trustor), the lender (beneficiary), and a neutral third party (trustee), often a title company. The borrower transfers legal title to the trustee, who holds it in trust for the lender.
The borrower retains equitable title, meaning they have the right to use and possess the property. If the borrower defaults, the trustee can typically initiate a non-judicial foreclosure process (power of sale), which is usually faster and less expensive than a judicial foreclosure, though the specific process varies by state law.
Which Is Better: Mortgage or Deed of Trust?
Neither instrument is inherently "better" than the other; the preference often depends on state law and the perspectives of the borrower and lender.
Lenders often favor deeds of trust because the non-judicial foreclosure process (where allowed) is typically faster and cheaper.
Borrowers might prefer mortgages because the judicial foreclosure process offers more protections and opportunities to cure the default, although it can be a longer and more stressful process.
In Illinois, mortgages are the standard instrument used for securing home loans. Therefore, borrowers and lenders operate within the framework of judicial foreclosure.
This means if a borrower defaults, the lender must file a lawsuit, and the process is overseen by the courts, providing specific timelines and borrower rights, such as the right of redemption.
While deeds of trust exist, they are uncommon for standard residential financing in the state.
Wrapping Up
While both mortgages and deeds of trust secure loans with real estate, they operate differently, particularly concerning the parties involved and the foreclosure process.
Illinois primarily uses mortgages, involving a judicial foreclosure process if necessary.
Have questions about your Illinois mortgage? Use our Illinois Mortgage Calculator or consult with a local real estate professional.