Written by James Chae — Co-Founder, Expert Sapiens
Reviewed March 2026
Real Estate
Definition
A legal document used in many states instead of a mortgage, transferring bare legal title to a neutral trustee as security for a home loan until it is paid off.
A deed of trust is a real estate financing instrument that involves three parties: the borrower (trustor), the lender (beneficiary), and a neutral third party (trustee). When a buyer takes out a home loan in a deed-of-trust state, they sign over bare legal title to the trustee, who holds it as security for the loan. The borrower retains equitable title — the right to use and enjoy the property — and the trustee holds legal title in trust until the loan is repaid in full.
The primary practical difference between a deed of trust and a traditional mortgage involves the foreclosure process. In mortgage states, foreclosure must go through the courts (judicial foreclosure), which is time-consuming and expensive. In deed-of-trust states, the trustee can foreclose through a non-judicial process (a trustee's sale or power of sale) once the lender certifies default, typically completing foreclosure in a few months rather than years. This efficiency benefits lenders and generally results in lower mortgage rates for borrowers in deed-of-trust states.
When the loan is paid off, the trustee executes a deed of reconveyance that transfers legal title back to the borrower, clearing the lien from the public record. The deed of trust itself is recorded in county land records as a lien against the property, which is why title searches will show it when a property is sold or refinanced.
Deed-of-trust states include California, Texas, Colorado, Arizona, Virginia, and about half of all U.S. states. The remaining states primarily use traditional mortgages. Some states allow either instrument. The choice of instrument is determined by state law, not by the borrower or lender.
Borrowers who sign a deed of trust are granting significant rights to a lender with fewer procedural safeguards than a traditional mortgage provides. In a default scenario, the non-judicial foreclosure process can move much faster than many homeowners expect, leaving limited time to respond or resolve the situation. Understanding what you are signing — and what rights and timelines apply in your state — is critical before taking on any secured real estate debt.
A real estate attorney can explain the specific terms of your deed of trust, advise on your rights in a default or dispute scenario, and review any loan documents before closing. This is especially important when purchasing investment properties, refinancing under unusual circumstances, or navigating any financial hardship that could put the property at risk.
Written by James Chae — Co-Founder, Expert Sapiens
Reviewed March 2026