Financing and Mortgages
This domain tests how North Carolina real estate debt is documented and secured, with emphasis on deeds of trust, priority, and foreclosure. Mortgage math and loan products also appear.
Core rules
- North Carolina commonly uses a deed of trust: the borrower conveys title to a trustee to secure a note, the lender is the beneficiary, and the trustee may foreclose by power of sale after default. A mortgage is a two-party lien; a deed of trust is three-party.
- The promissory note contains the promise to pay, interest rate, maturity, prepayment terms, and late charges. The security instrument creates the lien.
- Priority generally follows recording. Purchase-money deeds of trust, subordination agreements, and refinances affect rank.
- Amortization spreads principal and interest over time. Adjustable-rate mortgages adjust by index and margin with caps. The APR includes finance charges. Escrow accounts hold taxes and insurance. RESPA, TILA, and private mortgage insurance rules affect disclosures and costs.
Worked example
Lender A records a deed of trust on January 5. Lender B records a second deed of trust on February 1. A has priority. If B later agrees in writing to subordinate to a refinance by C, C moves ahead of B only to the extent the subordination agreement says; B does not automatically lose priority to every future loan.
Traps that cost marks
Calling a deed of trust a mortgage; assuming possession transfers to the lender; ignoring recording order; confusing the APR with the note rate; and forgetting that foreclosure can extinguish junior liens.