Deed of Trust
What Is a Deed of Trust?
A deed of trust is a legal document used in some states instead of a traditional mortgage to secure a home loan.
It involves three parties:
- Borrower (trustor)
- Lender (beneficiary)
- Neutral third party called a trustee
The trustee holds legal title to the property until the loan is fully repaid.
Why It Matters in a Mortgage
A deed of trust:
- Secures the lender’s interest in the property
- Defines foreclosure procedures
- May allow nonjudicial foreclosure in certain states
Because of its structure, foreclosure under a deed of trust can sometimes proceed faster than under a traditional mortgage.
State law determines whether a mortgage or deed of trust is used.
How It Works
- Borrower signs promissory note (promise to repay).
- Borrower signs deed of trust securing the loan.
- Trustee holds title until debt is satisfied.
When the loan is paid in full, the trustee reconveys title to the borrower.
Deed of Trust vs. Mortgage
Deed of Trust → Involves trustee
Mortgage → Two-party agreement
Both secure repayment with the property as collateral.
FAQs About Deeds of Trust
Is a deed of trust the same as a mortgage?
They serve the same purpose but use different legal structures depending on state law.
Does the trustee own the home?
The trustee holds legal title as security, not beneficial ownership.
Can foreclosure happen without court involvement?
In some deed-of-trust states, yes, through nonjudicial foreclosure.
Related Terms
