Deed of Trust
Definition and meaning of Deed of Trust in real estate.
A deed of trust is a legal document used in many states as an alternative to a mortgage, wherein a borrower transfers the legal title of a property to a neutral third-party trustee to secure a loan. The trustee holds the title until the debt is fully paid to the lender.
In more detail
In a deed of trust transaction, three parties are involved: the borrower, the lender, and the trustee. If the borrower repays the loan in full, the trustee releases the title back to the borrower. However, if the borrower defaults, the trustee can initiate foreclosure proceedings.
Because the trustee holds the power of sale, this document typically allows for a non-judicial foreclosure, which is faster and less expensive than the court-supervised judicial foreclosure required by a mortgage. The choice between using a deed of trust or a mortgage varies by state law.
Key facts
| Category | Legal, Titles & Closing |
|---|---|
| Parties involved | Trustor (borrower), beneficiary (lender), and trustee (neutral third party) |
| Foreclosure type | Typically allows for non-judicial foreclosure without court intervention |
| Applies to | Real estate financing transactions in states that authorize trust deeds |
A buyer in California signs a deed of trust when taking out a home loan, granting a title company the right to sell the property if mortgage payments are not made.
Frequently asked questions
What is the difference between a deed of trust and a mortgage?
A deed of trust involves three parties and typically allows for non-judicial foreclosure, whereas a mortgage involves two parties and often requires a court order to foreclose.
Who acts as the trustee in a deed of trust?
The trustee is typically a title company, an escrow agent, or an attorney who holds the legal title until the loan is resolved.
Related terms
Sources & references
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