Deed of Trust: Definition, How They Work
Jump to Section
Quick Facts — Deed of Trust Lawyers
- Avg cost to draft a Deed of Trust: $560.00
- Avg cost to review a Deed of Trust: $390.00
- Lawyers available: 128 real estate lawyers
- Clients helped: 251 recent deed of trust projects
- Avg lawyer rating: 4.93 (9 reviews)
What Is a Deed of Trust?
A deed of trust, also called a trust deed, is a legal agreement made at a property's closing. It is a type of secured real estate transaction used in some states in place of a mortgage. The individual purchasing a property and a lender make this agreement, which states that the property buyer will repay a loan. A third party, known as a trustee, holds the property's legal title until the loan gets paid in full.
A deed of trust is the security for a loan and gets recorded in public records. Some states will require a borrower to sign a deed of trust to take out a home loan, much like other states require signing a mortgage. Fundamental differences exist between deeds of trust and mortgages, however. For example, a deed of trust requires more people to be involved in the property sale than a mortgage would. Only a mortgage gets executed through the judicial system.
What Must a Deed of Trust Include?
To be considered a legally binding document, any deed of trust needs to cover several critical details. Required information includes the following:
- Original loan amount
- Description of the property used as collateral or security ( here is an article about using collateral for a loan)
- Names of all parties involved (such as trustor, beneficiary, and trustee)
- The inception date of the loan
- The maturity date of the loan
- Any fees, such as late fees
- Provision and requirements of the mortgage
- Legal procedures in case of default, such as a power of sale clause ( here is an article about power of sale)
- Acceleration and alienation clauses to explain when the homeowner is considered delinquent or what happens when the individual sells the property
- Any riders with clauses such as terms of an adjustable-rate mortgage or prepayment penalties
Who Is Involved With a Deed of Trust?
Three parties must be involved with any deed of trust:
- Trustor: This party is the borrower. A trustor is sometimes called an obligor.
- Trustee: As a third party to a deed of trust, the trustee holds the property's legal title.
- Beneficiary: This party is the lender.
A trustee represents neither the borrower nor the lender. Instead, the trustee is an entity that holds the power of sale in case a borrower defaults. The trustee is typically a title or escrow company.
How Does a Deed of Trust Work?
A borrower gives a lender one or more promissory notes in exchange for the deed of trust. Promissory notes are documents that the borrower signs which state the borrower's promise to pay back a debt. The promissory note will contain information such as the interest rate along with other obligations of the agreement.
After the borrower pays the deed in full, the trustee will reconvey the property to its buyer. A promissory note is marked as paid in full once the buyer pays the loan entirely, and the property buyer receives the deed.
A trustee may file a notice of default if the borrower does not pay following the terms of the promissory note. A trustee may also substitute a different trustee for handling foreclosure.
Deed of Trust Versus Mortgage
A deed of trust and a mortgage serve a similar purpose, but some key distinctions exist between the two types of legal documents.
Differences Between Deeds of Trusts and Mortgages
Significant differences between the two documents include the following:
- Foreclosure type: The foreclosure type a property owner faces will depend on whether the property owner has a deed of trust or mortgage. Someone who has a deed of trust typically faces a nonjudicial foreclosure, while a lender will need to go through the courts if a mortgage comes into play.
- Expense and length of foreclosure process: Since a lender will have to seek judicial foreclosure to take back a property using a mortgage loan, a mortgage generally takes more money and time for foreclosure proceedings. As a result, mortgage lenders tend to use deeds of trust in states that allow them. A lender will almost always spend less time and incur lower costs reclaiming a property when using a deed of trust instead of a mortgage.
- Parties involved: Only two parties, a borrower and a lender, are engaged in a mortgage contract. A deed of trust has a trustee, the neutral third party, involved in addition to the borrower and lender.
Similarities Between Deeds of Trusts and Mortgages
The two agreements also have a few significant similarities, including:
- Both agreements are distinct from loans: Neither a deed of trust nor a mortgage is a home loan. The loan states that a property owner will pay back a set amount of money to a lender, while both a deed of trust and a mortgage place a lien on a property.
- Both agreements allow for foreclosure: Both a deed of trust and mortgage give a lender a method of taking back a property via foreclosure. These agreements essentially state that if the borrower does not follow the loan terms, the lender can put the property into foreclosure.
- State law dictates both types of agreements: Both mortgages and foreclosure deeds are subject to state laws. The specific type of contract a lender must use will depend on what is legal in a particular state.
Image via Unsplash by tierramallorca
Deed of Trust Versus Promissory Note
A deed of trust often requires a promissory note, but the promissory note is a specific document type. While a deed of trust describes the terms of debt as secured by a property, a promissory note acts as a promise that the borrower will pay the debt.
A borrower signs the promissory note in favor of a lender. The promissory note includes the loan's terms, such as payment obligations and the loan's interest rate. However, although the promissory note is usually a separate document, both a deed of trust and a mortgage can be legally considered a type of promissory note.
During the term of a loan, a lender keeps the promissory note, and the borrower only has a copy of the note. Once the borrower pays off the loan, the promissory note is marked as "paid in full." Then, the borrower receives the note with a recorded reconveyance deed.
Can You Use a Deed of Trust Anywhere?
State law governs the use of both deeds of trust and mortgages. Some states only legally allow mortgages, while other states only allow lenders to use deeds of trust. A few states will allow either type of contract. In these states, the lender gets to choose the type of agreement a borrower receives. Some states use neither mortgages nor deeds of trust but instead use other contracts such as security deeds for loan transactions to give lenders a security interest in the property.
Since state laws vary regarding the type of document you can use, it's always essential to consult with an experienced lawyer to discuss legal options and your state's requirements. A lawyer can also help ensure that you create and use a legally binding document that protects you in your specific situation regarding real estate transactions for residential or commercial property.
See Real Deed of Trust Projects
Florida Deed of Trust, Quit Claim Deed, Promissory Note Drafting
- Florida
- 3 lawyer bids
- $750 - $1,500
North Carolina Review for Due on Sale Implication in Deed of Trust to Clarify if an LLC is the Best Fit for a Rental Property Review
- North Carolina
- 4 lawyer bids
- $350 - $700
California Prepare and Record Inter-Spousal Transfer Deed in Fremont, CA Prepare & File
- California
- 4 lawyer bids
- $350 - $700
See all Deed of Trust projects
ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.
Need help with a Deed of Trust?
Meet some of our Deed of Trust Lawyers
Ryenne S.
My name is Ryenne Shaw and I help business owners build businesses that operate as assets instead of liabilities, increase in value over time and build wealth. My areas of expertise include corporate formation and business structure, contract law, employment/labor law, business risk and compliance and intellectual property. I also serve as outside general counsel to several businesses across various industries nationally. I spent most of my early legal career assisting C.E.O.s, General Counsel, and in-house legal counsel of both large and smaller corporations in minimizing liability, protecting business assets and maximizing profits. While working with many of these entities, I realized that smaller entities are often underserved. I saw that smaller business owners weren’t receiving the same level of legal support larger corporations relied upon to grow and sustain. I knew this was a major contributor to the ceiling that most small businesses hit before they’ve even scratched the surface of their potential. And I knew at that moment that all of this lack of knowledge and support was creating a huge wealth gap. After over ten years of legal experience, I started my law firm to provide the legal support small to mid-sized business owners and entrepreneurs need to grow and protect their brands, businesses, and assets. I have a passion for helping small to mid-sized businesses and startups grow into wealth-building assets by leveraging the same legal strategies large corporations have used for years to create real wealth. I enjoy connecting with my clients, learning about their visions and identifying ways to protect and maximize the reach, value and impact of their businesses. I am a strong legal writer with extensive litigation experience, including both federal and state (and administratively), which brings another element to every contract I prepare and the overall counsel and value I provide. Some of my recent projects include: - Negotiating & Drafting Commercial Lease Agreements - Drafting Trademark Licensing Agreements - Drafting Ambassador and Influencer Agreements - Drafting Collaboration Agreements - Drafting Service Agreements for service-providers, coaches and consultants - Drafting Master Service Agreements and SOWs - Drafting Terms of Service and Privacy Policies - Preparing policies and procedures for businesses in highly regulated industries - Drafting Employee Handbooks, Standard Operations and Procedures (SOPs) manuals, employment agreements - Creating Employer-employee infrastructure to ensure business compliance with employment and labor laws - Drafting Independent Contractor Agreements and Non-Disclosure/Non-Competition/Non-Solicitation Agreements - Conducting Federal Trademark Searches and filing trademark applications - Preparing Trademark Opinion Letters after conducting appropriate legal research - Drafting Letters of Opinion for Small Business Loans - Drafting and Responding to Cease and Desist Letters I service clients throughout the United States across a broad range of industries.
"It was pleasure working with Ryenne. Everything was super smooth and helpful!"
Bobby H.
Bobby E. Hill, Jr. is a native of Tuscaloosa, Alabama and holds undergraduate degrees in music and business administration from Xavier University of Louisiana. He received his Juris Doctor from the University of Miami School of Law where he was a staff and articles editor for the school’s Race & Social Justice Law Review and a student attorney in the institution’s Immigration Clinic. In addition to freelancing, Bobby is currently a litigation associate at Johnson & Freeman, LLC, a boutique litigation firm in Atlanta, Georgia, where he practices in the firm's Condemnation, Probate, Real Estate Litigation, Real Estate Transactions, E-Discovery and Business and General Civil Litigation Practice areas. In this role, Bobby has acquired appreciable experience in drafting memoranda of law for partners and senior counsel, and all litigation related pleadings including pleadings related to dispositive motions, discovery, appeals, and other post-judgment relief.
"Helpful. Professional. Gave us peace of mind on a business partnership agreement."
Ted A.
Equity Investments, Agreements & Transactions | Securities & Lending | Corporate Governance | Complex Commercial Contracts | Outside General Counsel & Compliance
"Ted was extremely responsive, knowledgeable, easy to work with and was able help me the same day. I would confidently recommend him in the future."
Stacey D.
I enjoy helping businesses of all sizes succeed, from start-ups to existing small and medium sized businesses. I regularly advise corporate clients on a variety of legal issues including formation, day to day governance, reviewing and drafting business contracts and other agreements, business acquisitions and sales, as well as commercial and residential real estate issues, including sales, purchases and leases. As an attorney licensed in both Michigan and Florida, I also advise clients on real estate issues affecting businesses and individuals owning real property in either state, whether commercial, residential or vacation/investment property. I also regularly assist nonprofit organizations in obtaining and maintaining tax exempt status, and provide general legal counsel on all matters affecting public charities, private foundations and other nonprofit organizations.
"She is clear, concise and insightful. She provided real value at a fair price. Do yourself a favor and hire her."
Anand A.
Anand is an entrepreneur and attorney with a wide-ranging background. In his legal capacity, Anand has represented parties in (i) commercial finance, (ii) corporate, and (iii) real estate matters throughout the country, including New Jersey, Pennsylvania, Delaware, Arizona, and Georgia. He is well-versed in business formation and management, reviewing and negotiating contracts, advising clients on financing strategy, and various other arenas in which individuals and businesses commonly find themselves. As an entrepreneur, Anand is involved in the hospitality industry and commercial real estate. His approach to the legal practice is to treat clients fairly and provide the highest quality representation possible. Anand received his law degree from Rutgers University School of Law in 2013 and his Bachelor of Business Administration from Pace University, Lubin School of Business in 2007.
"Anand provided excellent and responsive service. Highly recommend."
Mariah R.
McGhee at Law is a purpose-driven law firm located in Indiana. We are focused on assisting Clients with creating opportunities of advancement. Our strategy is to assist, advise and support our Clients in fulfilling their vision for their personal lives and businesses through the practice of law.
"Mariah was great to work with. She clearly explained her billing system in the bid, was responsive with her messages, and quickly provided the legal documentation we needed as requested. I would not hesitate to hire her services again."
July 2, 2023
Suzanne E.
I have been an attorney for 30 years. I am a Colorado native with many years in Alaska. I have a Bachelors in Biology, Chemistry and French, JD from Seattle University and Masters in Environmental Science and Law from Vermont Law School. I have traveled extensively, mostly in Europe, and speak several languages with more or less proficiency. I practiced law in Alaska and Colorado, much of it in remote areas but also large cities. I have taught in an environmental masters program and run large environmental nonprofits and a hot springs resort. I have worked with and run business incubators, a process I love. Empowering people to build their own futures is a passion.
Find the best lawyer for your project
Browse Lawyers NowLawyer Reviews for Deed of Trust Projects
Review for Due on Sale Implication in Deed of Trust to Clarify if an LLC is the Best Fit for a Rental Property
"Great work"
Reply From Ryan D.
Thank you for the positive feedback. I’m glad I could provide clarity on the Deed of Trust issue.
View MoreDraft Deed, Deed of Trust, and Promissory Note for Seller Financing
"we are happy with the services we requested!"
Property deed contract overview
"Thank you for taking your time to review my contract with me, answer all my questions and for making me comfortable and knowledgeable enough to continue in this land buying process!"
Review of 3-Page Gift Deed Transfer in Texas with Feedback and Redlines
"Great service. Thorough and responsive. I appreciated his expertise."
Real Estate
Deed of Trust
Illinois
Can a Deed of Trust be modified without the consent of all parties involved?
I recently purchased a property with the help of a mortgage loan, and a Deed of Trust was executed to secure the loan. However, I have come across some financial difficulties and am considering refinancing the mortgage to lower my monthly payments. I have been informed that the terms of the Deed of Trust may need to be modified in order for the refinancing to take place, but I am unsure whether all parties involved, including the lender and the trustee, need to provide their consent for such modifications to be made. Can a Deed of Trust be modified without the consent of all parties involved, or do I need to obtain their approval before proceeding with refinancing?
David U.
You must have their consent. In the general/miscellaneous provisions toward the bottom of the DOT, you should see a standard provision, stating that no amendment to the deed of trust will be valid unless evidenced by a fully executed written agreement.
Real Estate
Deed of Trust
North Carolina
I am looking for a Warranty Deed for the sale of property in St. Croix, USVI. All forms I locate are specific to one of the US 50 states.
State listed below as my state is not relevant ... I need a Warranty Deed form or written up for USVI property.
Jane C.
You will need to consult with a real estate attorney in USVI.
Quick, user friendly and one of the better ways I've come across to get ahold of lawyers willing to take new clients.
View Trustpilot ReviewNeed help with a Deed of Trust?
Real Estate lawyers by top cities
- Austin Real Estate Lawyers
- Boston Real Estate Lawyers
- Chicago Real Estate Lawyers
- Dallas Real Estate Lawyers
- Denver Real Estate Lawyers
- Houston Real Estate Lawyers
- Los Angeles Real Estate Lawyers
- New York Real Estate Lawyers
- Phoenix Real Estate Lawyers
- San Diego Real Estate Lawyers
- Tampa Real Estate Lawyers
Deed of Trust lawyers by city
- Austin Deed of Trust Lawyers
- Boston Deed of Trust Lawyers
- Chicago Deed of Trust Lawyers
- Dallas Deed of Trust Lawyers
- Denver Deed of Trust Lawyers
- Houston Deed of Trust Lawyers
- Los Angeles Deed of Trust Lawyers
- New York Deed of Trust Lawyers
- Phoenix Deed of Trust Lawyers
- San Diego Deed of Trust Lawyers
- Tampa Deed of Trust Lawyers
ContractsCounsel User
loan promissory note to review
Location: California
Turnaround: Less than a week
Service: Contract Review
Doc Type: Deed of Trust
Page Count: 3
Number of Bids: 5
Bid Range: $400 - $700
User Feedback:
ContractsCounsel User