A commercial mortgage and a deed of trust are both legal documents used in real estate transactions, but they have some important differences.
A commercial mortgage is a loan agreement between a lender and a borrower for the purchase or refinancing of commercial property. In a commercial mortgage, the lender provides funds to the borrower, and the borrower uses the commercial property as collateral for the loan. The borrower retains ownership of the property, but the lender has a lien on the property until the loan is paid off.
A deed of trust, on the other hand, is a legal document used in some states instead of a mortgage to secure a loan for the purchase or refinancing of real estate. In a deed of trust, the borrower transfers legal title to the property to a third-party trustee, who holds the title as security for the loan. The borrower retains equitable title and the right to use and occupy the property, but the trustee has the power to sell the property to satisfy the debt if the borrower defaults on the loan.
The main difference between a commercial mortgage and a deed of trust is the way they secure the loan. In a commercial mortgage, the lender has a lien on the property, while in a deed of trust, the trustee holds legal title to the property until the loan is paid off. The use of a deed of trust is more common in some states, such as California, while others, such as New York, primarily use mortgages.
It's important to note that the specific laws and regulations governing commercial mortgages and deeds of trust can vary from state to state. Therefore, it's important to consult with a real estate attorney or other qualified professional in your state for specific guidance.
If you have any questions about this article or would like to discuss a scenario of your own with our team, please feel free to contact Colin Dubel at colin@harborwestcommercial.com or 949-735-6415.