A trust deed is a legal document that gives a third party the right to hold title to a property in exchange for a loan. The trust deed includes three parties: the beneficiary, the trustee, and the lender. The purpose of a trust deed is to provide the lender with recourse in the event the beneficiary fails to make the loan payments. Listed below are some of the benefits of trust deeds.
When compared to mortgages, a trust deed is easier to foreclose. Since there is no judicial process involved, the foreclosure process is less lengthy. However, it also means that the buyer cannot ask for a mortgage in lieu of the trust deed. As such, buyers must be aware of the terms of a trust deed before committing to a transaction. As with any legal transaction, there are important considerations to make before deciding to sign a deed.
A trust deed is not suitable for every investor. Historically, it was only available to accredited investors who were over $1 million in net worth or annual income. Some states, including Texas, have regulated trust deeds as a security product, and if you have questions, a licensed broker can advise you. A trust deed is not suitable for every investor, so it is important to seek professional advice before investing in one.
The difference between a mortgage and a trust deed is primarily the process for securing the loan. A mortgage involves two parties, the borrower and the lender, and a third party, called the Trustee. If the borrower does not make the monthly payments, the lender can foreclose on the property and evict the residents. It is this process that secures a home purchase and gives security to the lender.
In California, a lender will record a Notice of Default, giving the borrower ninety days to correct the default. If the borrower does not comply with the notice, the lender will then sell the property for the unpaid amount. The lender will then be able to sell the property for a profit. The process of non-judicial foreclosure is usually faster than a judicial foreclosure. In contrast, judicial foreclosure requires the lender to file a lawsuit, which can take a long time.
A trust deed is an agreement between the borrower and a lender that transfers the property to a neutral third party. This third party, known as a trustee, will hold the property until the loan is fully paid. The borrower will retain the legal title and full responsibility for the premises. The lender will then transfer the property to the Trustee, and the loan will be repaid. There are many advantages of trust deeds and this article discusses them.