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How Is a Security Deed Different from a Mortgage?

Before you get financing for your home, you need to make sure you know the difference between a Security Deed and a mortgage. Having a basic understanding of what's involved can help you protect yourself and your real estate.


What Is a Security Deed?

A security deed provides a full and direct legal title transfer from the borrower to the lender, leaving the equitable title with the borrower. Until the payments conclude, the borrower only retains the equitable right. During that time, he or she keeps exclusive right of possession and the right of redemption, meaning that the lender cannot sell the property's legal title unless the borrower defaults or they agree on the sale.


Security deeds are sometimes referred to as a deed to secure debt, warranty deed, or a loan deed.


What Is a Mortgage?

Contrary to popular belief, a mortgage is little more than a lien on the property. The property's legal and equitable title can be passed on to as many other individuals and owners as the buyers choose.


Most of the time, the mortgage runs with the land, meaning that the borrower who ends up paying off the loan may not be the one who got it in the first place. Lending institutions are not as fond of mortgages as they are of Security Deeds because they do not have an actual title interest in the mortgage. They only have the equivalent of a high priority lien, and other interested parties could potentially override that interest in a few situations. Foreclosing on a mortgage also involves additional paperwork and legal requirements that make it more of a headache for the bank, so they are often more willing to offer better deals if you agree to a Security Deed rather than to a mortgage.