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Delaware law follows the lien theory mortgage doctrine

Most Delaware residents who take out a loan to buy a home or other piece of real estate will refer to the financial arrangement as a mortgage, but that term really applies to the interest that the lender has in the property rather than the loan itself. The mortgage assures that the lender's interests are protected should the borrower fail to make their required monthly payments.

There are two legal doctrines that determine how the interests of lenders are protected. In states that follow title theory, the lender actually holds title to the property and allows the borrower to occupy it. In states that follow lien theory, the borrower holds the title to the property and the lender's interests are protected by a mortgage lien. Delaware is a lien theory state.

The main difference between the two theories in practice is the steps that lenders must go through a process to protect their interests should borrowers default. In title theory states where the lender owns the property, they are able to revoke the borrower's occupancy rights and reclaim the house, lot or apartment. However, in lien theory states, lenders must go through a legal process to take possession of a property or force its sale. Placing a mortgage lien on a property's title also ensures that the lender will be compensated should the property be sold.

Buying a home is a significant financial commitment for most Delaware residents, but the process can sometimes be frustrating as unforeseen problems crop up and closing dates are shifted. Experienced real estate attorneys will likely understand that home buyers may be anxious to move into their new homes as quickly as possible, and they could take a proactive approach to identify possible issues ahead of time and avoid unnecessary delays.

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