What is a Deed of Trust?
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It is very similar to a mortgage. With a mortgage, you continue to hold full legal title to the property you have bought but you give the lender a lien on the property. If you do not make your mortgage payments, the lender can foreclose on the property. In some states, a deed of trust is used instead of a mortgage. With a deed of trust, you give the lender a deed to the property but the lender can only use or sell the property if you do not meet the loan terms. As a practical matter, there is very little difference between these two methods of giving the lender a security interest in the property.
In the United States, a deed of trust (or a trust deed) is an evidence of debt. It is the record of transfer of the title of a property to a third party to hold as security. It is a common method of financing your real estate property in several states. It is also the recorded document of title in the public records. A deed of trust instrument identifies the legal description of the property, the borrower and lender, the loan amount, the loan inception and maturity dates. It also specifies late fees, prepayment penalties, adjustable or fixed interest rates and any legal procedures or provisions and requirements. While most states use a mortgage, states like California use a deed of trust. This deed establishes a trustee as holding title to the property until the obligation is paid in full. In other words, there is a three party system: the purchaser of the property who is applying for the loan, the lender, and the trustee, who holds the deed of trust in good faith for the lender and bo
