A trust deed is a legal instrument used in real estate in the United States. It creates a security interest in real estate. The legal title to real estate is transferred to a trustee who holds it as security for a loan. This document varies in purpose and can be used for many purposes, such as transferring ownership of a home to a child or grandchild. Listed below are some of the benefits of this legal instrument.
A trust deed is used most commonly in Alaska, California, Idaho, Montana, Illinois, and Missouri. Other states often use trust deeds as a form of real estate financing. This type of deed transfers title to a trustee, usually a title company. The trustee holds the property title as security for a loan, and returns it to the borrower once the loan is paid off. The trustee will only become involved in the arrangement if the borrower defaults on the loan. In that case, the trustee can sell the property in nonjudicial foreclosure, recouping its losses.
A trust deed is more complex than a mortgage, and should be used only in situations where there is a guarantor or beneficiary. A trustee or third party holds the lien against the property and initiates the foreclosure process on the lender’s request. However, the legal term “trust deed” is more accurate and is a more common term of art. If you are unsure about the difference between mortgages and trust deeds, it is best to get legal advice from a real estate attorney or licensed attorney.
In essence, a trust deed is an agreement between a borrower and lender. It transfers legal title to the real estate to the trustee, who will hold the property for the borrower. The lender, in turn, will have the legal right to release the property to the borrower upon completion of the loan. It is less common than a mortgage but is still valid in at least 20 states in the U.S. These deeds are not unlike mortgages in terms of lending.