A deed of trust is a legal document used in many states as an alternative to a traditional mortgage to secure a real estate loan. While a mortgage involves two parties (borrower and lender), a deed of trust involves three: the borrower (called the trustor), the lender (called the beneficiary), and a neutral third party (called the trustee) who holds bare legal title to the property as security for the loan.
The key difference between a deed of trust and a mortgage is what happens when the borrower defaults. With a mortgage, the lender must go through judicial foreclosure — filing a lawsuit, going to court, and obtaining a judge's order to sell the property. This process can take months or even years. With a deed of trust, the trustee can initiate a non-judicial foreclosure (also called a trustee's sale or power-of-sale foreclosure), which is significantly faster and less expensive because it does not require court involvement.
States are generally classified as "mortgage states" or "deed of trust states" based on which instrument is customarily used. Texas, for example, is a deed of trust state where non-judicial foreclosure is the norm. Florida is primarily a mortgage state requiring judicial foreclosure. Some states allow both instruments. The choice affects not only the foreclosure process but also certain legal rights and procedures throughout the loan's life.
When the loan is fully repaid, the trustee executes a reconveyance — a document that transfers legal title back to the borrower and releases the lien. The reconveyance is recorded with the county, clearing the deed of trust from the property's title. If the lender fails to request a reconveyance after payoff, the borrower may need to take action to clear the old lien from the record.
At closing, the deed of trust is signed by the borrower, notarized, and recorded with the county — just like a mortgage. The title company ensures it is properly recorded in the correct priority position. At Beycome Title, we handle closings in both mortgage states and deed of trust states, ensuring every document meets your state's specific requirements. Estimate your closing costs or get your free quote.