Under title theory, before payoff, the borrower has which type of rights in the property?

• A. Legal title
• B. Equitable rights
• C. Full ownership
• D. No rights

Answer: (B)

In title theory, the mortgage transfers legal title to the lender while the borrower keeps an equitable interest in the property. That means the borrower has equitable rights—a beneficial ownership that allows possession and use of the property and the right to regain full ownership by paying off the loan. The lender holds the legal title until payoff, which is why the borrower isn’t the full owner yet. If the debt is paid, full ownership returns; if not, the lender can proceed with foreclosure based on the legal title they hold. The other options don’t fit because legal title is with the lender, full ownership would require both titles together, and “no rights” isn’t accurate since the borrower does retain an interest (equitable rights) in the property.