What is a deed of trust?

A deed of trust is accurately described as a three-party loan instrument that involves a borrower, a lender, and a trustee. In this arrangement, the borrower secures a loan by transferring title to the property to a trustee, who holds it as security for the lender until the loan is repaid. This method serves to provide a layer of security for the lender while the borrower retains possession and use of the property.

The borrower has an obligation to make regular payments to the lender, and if the borrower defaults, the trustee has the authority to sell the property to satisfy the loan. This structure is distinct from a mortgage, where only two parties (the borrower and the lender) are involved. The involvement of a trustee who acts as an impartial third party enhances the protection for all parties involved in the transaction.

Overall, the deed of trust is an important legal instrument in real estate finance, facilitating loans by clearly defining the roles and responsibilities of each party involved.