Does California use mortgages?

Even though many people use the word mortgage in California, most “mortgages” in California are actually deeds of trust.

What exactly is a mortgage?

First off, despite the way we use the term today – a mortgage is not a home loan.
A mortgage is a 2 party instrument. The 2 parties involved in a mortgage are the lender and the borrower. The borrower (the mortgagor) is the one who gives the mortgage to the lender (the mortgagee). That may sound backwards, but it is in fact how the mortgage instrument works. The borrower is also signing a promissory note that details the terms of the loan (interest rate, length of the loan, etc) The mortgage is a document that the borrower signs and basically says “If I do not pay the the loan as promised, then you can take my home.”

What exactly is a deed of trust?

A deed of trust is a 3 party instrument. The 3 parties involved are the beneficiary (the lender), the trustor (the borrower), and a neutral 3rd party known as the trustee. The trustee is the extra party involved in the deed of trust. The lender is known as the beneficiary because they benefit by receiving payments with interest from the borrower. The borrower is the trustor because he or she is trusting the neutral 3rd party (the trustee) to hold the title to the home until the loan is fully paid off. If the loan is fully paid off then the lender (beneficiary) orders the trustee to give the title back to the borrower (the trustor).

Even though many people use the word mortgage in California, most “mortgages” in California are actually deeds of trust.