Reply by HisRoyalHughness on 6/7/04 2:50pm
Msg #2814
A person who is buying a house with a note against it does not own the house: He has an equitable interest, the equity being the difference between what is owed against the house and the value of the house. $100,000 house, $75,000 note = $25,000 equity or equitable interest. The person who has the equitable interest gets what is normally called a warranty deed. That is a deed from the previous owner to him conveying him the house and guaranteeing that there are no defects in the title or undisclosed obligations against the property.
When the purchaser buys the house and uses somebody else's money -- Chase Manhattan money, for example -- the lender takes what is called a deed of trust or, in some places, a security deed or deed to secure debt. That deed gives the lender an interest in the property sufficient to secure his loan. The purchaser cannot sell the property to someone else or can't subdivide it, for example, and he must also pay off the note (which is normally executed simultaneously with the deed of trust), or the holder of the deed of trust can foreclose on the property -- take it back.
When the note is finally satisfied, the holder of the deed of trust will cancel the note and sign over the deed of trust to the holder of the warranty deed.
Hope this helps.
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