A mortgage is a contract or agreement that includes a promissory note in which the mortgagor (borrower) agrees to repay the loan to the mortgagee (the lender—often a bank) and agrees that the real property that is the subject of the mortgage will serve as security or collateral for payment of the loan.

If the mortgagor (borrower) fails to timely make the loan payments, the lien created by the mortgage allows the mortgagee (lender) to seek judicial foreclosure on the property (a forced sale effected through the courts) and use the proceeds to pay the balance of the loan—plus any additional fees and penalties the mortgagor (borrower) is obligated to pay.

Some states use a mortgage agreement to secure the repayment of a loan for the purchase of real property and some states use a deed of trust.

In a mortgage, the mortgagor (borrower) retains title to the property (ownership) and grants the mortgagee (lender) a lien on the property. The mortgagor and mortgagee are the only two parties to the transaction and if the mortgagor defaults on the loan, the mortgagee must seek judicial foreclosure of the lien through the courts to sell the property and use the proceeds to satisfy the loan.

In a deed of trust, the grantor (borrower) transfers title (ownership) of the property to a third party (the trustee—often a title company) to hold title to the property as security or collateral, protecting the grantee (lender) until the grantor (borrower) repays the loan in full.

When a deed of trust serves as the security or collateral for the loan on the property, the lender may sell the property without going through the court system—and this is known as nonjudicial foreclosure. Nonjudicial foreclosure is usually less time-consuming and less expensive for the lender.

In Virginia, both mortgage agreements and deeds of trust are used to secure repayment of loans for the purchase of real property. A mortgage in Virginia involves a borrower (mortgagor) who retains title to the property and grants a lien to the lender (mortgagee) as security for the loan. If the borrower defaults, the lender must go through the judicial foreclosure process to enforce the lien, sell the property, and use the proceeds to pay off the loan balance and any additional fees. On the other hand, a deed of trust involves three parties: the borrower (grantor), the lender (grantee), and a third party (trustee), who holds the title as security. In the event of default, the lender can pursue a nonjudicial foreclosure, which allows the sale of the property without court intervention. This process is typically quicker and less costly than judicial foreclosure. Virginia law outlines specific procedures and requirements for both judicial and nonjudicial foreclosures, including notice requirements and rights of redemption for the borrower.