What Is a Deed of Trust? How Does It Work?

A Deed of Trust is an important legal document that serves as a mortgage when buying real estate. It is a contractual agreement between three parties; the lender, the borrower and the trustee. The lender loans money to the borrower to purchase a property and the trustee holds title on behalf of the lender until all payments are made in full.

The deed of trust outlines certain terms, such as how much money will be borrowed, repayment terms, interest rate and duration of loan. In addition, it also stipulates what happens in case of default by either party. In most cases, if there is default on payment by the borrower, then foreclosure proceedings can begin with authorization from the trustee. The trustee has authority to sell off or repossess any assets used for security against loan default without having to go through court proceedings first.

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