Learn personal and professional finance terms to keep you in the know
A deed of trust is a legal document used in certain states instead of a traditional mortgage to secure a home loan. While a mortgage involves two parties, the borrower and the lender, a deed of trust involves three: the borrower, the lender, and a neutral third party called a trustee, who holds the title to the property until the loan is fully repaid. If the borrower defaults, the trustee can sell the property through a non-judicial foreclosure process, which is typically faster and less expensive than the court-supervised process required with a traditional mortgage. From the borrower's perspective, a deed of trust functions much like a mortgage in terms of how the loan is repaid. Whether a state uses a mortgage or a deed of trust depends entirely on local real estate law.
