A trust deed is a legal instrument that transfers a security interest in real property to another person. The property owner transfers legal title to a trustee who holds the property as collateral for a loan. Trust deeds are used for a variety of reasons, but there are several main reasons why someone might want to consider drafting one. Below, we’ll cover some of these reasons and explain how to prepare one.
Investing in a trust deed may seem like an attractive investment option because the interest rate is low and the risks are relatively low. However, a trust deed does not have a liquid investment option, and investors must be prepared to commit for the full term of the loan. As such, a broker is recommended in order to achieve a win-win situation for everyone involved. Listed below are some pros and cons of trust deeds.
A trust deed transfers legal title to a third party, often a title company. A trustee holds legal title to the property in trust for the borrower, who will continue to live there while building equity in the home. A trust deed includes a power-of-sale clause that allows the trustee to sell the property without a judicial foreclosure. This option is beneficial to both parties since foreclosure can take years in some states.
Another benefit of a trust deed is that it protects the debtor’s assets. It can help people who have no assets to offer to their creditors, and can pay off their debts in 4 years or less. People with low incomes may wish to consider a debt-payment scheme under the Debt Arrangement Scheme, or sell their home to pay off their debts. However, it is important to understand the pros and cons of a trust deed before making the decision.
A trust deed is generally used in states such as Alaska, Colorado, Georgia, Illinois, Mississippi, Missouri, Tennessee, Texas, and Washington. Traditionally, it was only a lender and borrower involved, but there are similarities between a mortgage and a trust deed. The borrower and the lender sign an agreement that the property will be used as collateral if the borrower fails to make payments. If the borrower is unable to make payments, the lender will foreclose on the property, evict any residents, and sell the property.
When a borrower takes out a loan, a trust deed transfers legal title to the property to a third party who serves as the trustee. The trustee holds the property as collateral for the lender’s promise to pay off the debt. The borrower retains an equitable title to the property and is responsible for maintaining the premises. However, the trustee will retain the legal title to the property until the debt is paid off.
A trust deed differs from a mortgage in that it is a legal document between the lender and borrower, and a third party, a trustee, is required. Unlike a mortgage, a trust deed involves an additional party, the trustee, who holds the property title until the loan is repaid. The trustee may also put a property into foreclosure if a borrower fails to repay the loan.