A mortgage, as well as a deed of trust, are security instruments that pledge to the lender an interest in your real estate to secure payment of a promissory note. A mortgage is the instrument usually held by the lender by which property is pledged to secure the payment of a debt or obligation. A deed of trust has similar functions, but is usually held "in trust" by a trustee. The promissory note acknowledges a borrower's formal obligation to repay the loan.
Under some types of security instruments, if the buyer fails to pay on time, he or she can lose the pledged property or may be required to pay additional amounts on the loan. Under a deed of trust, for example, if a buyer fails to live up to the terms, the lender may be able to recover the property without court action.
A Real Estate Contract is an agreement between the seller and buyer that states the purchase price and method of payment, as well as other rights and duties. Under these agreements, the buyer usually does not receive a deed (or legal title) to the property until all required payments are made. In the event of default, payments may be forfeited, and the buyer's interest in the property may be lost. A recent statute governs the procedures that a seller must follow in order to forfeit the buyer's interest in a real estate contract without court action.