What does a mortgage or Deed of Trust signify in a real estate transaction?

A mortgage or Deed of Trust serves as a security instrument for the lender in a real estate transaction. It establishes the lender's legal claim against the property in case the borrower defaults on the loan. When a borrower takes out a mortgage, they're not selling the property outright but rather using it as collateral to secure the funds they're borrowing. Essentially, this means that the lender has the right to take ownership of the property through foreclosure if the borrower fails to fulfill their payment obligations.

This is pivotal in real estate transactions because it protects the lender's investment by ensuring that they have a recourse for recovering the loan amount in the event of non-payment. Understanding this role of the mortgage or Deed of Trust is crucial for both borrowers and lenders, as it establishes the terms and conditions under which the loan is secured.