What does "Deed of trust" mean?

Definition

A deed of trust is a legal agreement used in some states to secure a mortgage. It involves a third party that holds the property title until the loan is fully repaid.

Understanding the Deed of Trust

The deed of trust is part of closing documents in the mortgage process. It involves three parties: the borrower, the lender, and a trustee. In simple terms, the trustee holds the property title until the loan is repaid. Example: If you borrow $200,000, the trustee keeps the title until you pay off the loan. Many people think it's a type of mortgage, but it's not. It's a security instrument used in some states instead of a mortgage. It's important to know that the deed of trust doesn't transfer ownership of the property to the lender.

People Want To Know

Why would a lender prefer a deed of trust over a mortgage?

Lenders prefer a deed of trust over a mortgage because it allows for a faster foreclosure process. In a deed of trust, the trustee can sell the property without going through court, which can take several months. This efficiency reduces the time and costs associated with recovering the loan amount if the borrower defaults.

Why do people use a deed of trust?

People use a deed of trust to provide security for a mortgage by involving a Additionally, party who holds the property title until the loan is fully repaid. This arrangement can simplify the foreclosure process, as the trustee can act swiftly to sell the property if the borrower defaults. Additionally, it can offer more flexibility in handling the loan compared to traditional mortgages.

Who holds the deed if there is a mortgage?

The deed of trust is held by a Additionally, party, known as the trustee, until the mortgage loan is fully repaid. The borrower retains equitable title to the property while the lender holds a beneficial interest in the deed of trust.

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