A simple explanation to Deed of Trust and Land Trust
Deed of the trust is the most common instrument used by lenders when they do not favor mortgages.
What is a Deed of Trust?
A deed of trust is applicable in some states in which a real estate property does not need to be mortgaged. It involves three parties: –
He is the borrower and grantor of deed of trust
He is a neutral third party that receives the title of the property. This is usually a title company, escrow or bank.
This is the lender
In case trustor is unable to pay off the loan, the trustee has the right to sell the property and pay off the beneficiary. However, this has to be in accordance with the provisions mentioned in a deed of trust.
Free Printable Deed of Trust Template Form can be found on the internet at some reputed sites.
An important aspect is that of Land Trust in which trustee holds title to a property for the beneficiary. The creator of the trust (trustor) is often the beneficiary.
Various provisions of Deed of Trust
- Clear identification of parties involved
- Legal Description of property
- Trustee’s obligation to pay loan, taxes, insurance, on the property
- Re-conveyance clause
- Acceleration clause
How is it different from Mortgage?
The basic difference in both is the number of parties involved and the holder of title to property. In a mortgage, there is only borrower and lender. In Deed of trust, the title remains safe in a trust until the loan is paid off.