Deed of Trust: Guide and Process in 2025

A deed of trust is a real estate transaction agreement that allows a third-party trustee to hold the property title until the borrower repays the lender in full. The third party in a deed of trust is typically a title company or real estate broker^[0]

Some states use deeds of trust instead of mortgages, which involve only two parties. However, in many states, home loans are colloquially referred to as “mortgages,” although they may legally be deeds of trust.

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Deed of trust vs. mortgage

The main difference between a deed of trust and a mortgage is that a deed of trust involves more parties and shortens the foreclosures process. Deeds of trust and mortgages are both subject to state laws, are both public record, both allow for foreclosure and are both considered contracts.

However, there are two key differences:

1. Number of parties involved. A mortgage involves two parties: the lender and the borrower, while a deed of trust involves three parties: the lender, the borrower and the trustee.

2. Foreclosure type and time. Mortgages typically have to go through a judicial foreclosure, while deeds of trust generally can use a foreclosure process without involving the courts or needing a court order. Because a nonjudicial foreclosure process tends to be faster and less expensive than a judicial one, it usually takes less time and effort to foreclose with a deed of trust than with a mortgage^[0]

   Nolo.com. What's the Difference Between a Mortgage and Deed of Trust?. Accessed Sep 16, 2025.

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As a home buyer, you don’t have the option to choose between a mortgage or a deed of trust, even if you live in one of the states that allow both. In those states, the lender chooses which document to use.

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How a deed of trust works

A deed of trust works similarly to a mortgage by making a piece of real property the collateral for a loan. Here’s how the process works:

1. The trust deed includes a promissory note that spells out the exact terms of the loan including the principal, interest, occupancy, insurance and maintenance requirements. The borrower signs this note, agreeing to repay the borrowed money.

2. The trustee holds legal ownership of the property or in some states just holds the lien, which is a legal claim to the asset, but has no control over that property unless the borrower doesn’t make their scheduled payments. If you don’t make your loan payments on time, your lender can foreclose on the property.

3. While the buyer is making payments, the lender keeps the promissory note. Once the loan is paid off, the promissory note is marked “paid in full” and the deed is returned to the buyer. At this point, the buyer will own the property outright^[0]

   Cornell Law School Legal Information Institute. trust deed. Accessed Sep 17, 2025.

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Requirements to create a deed of trust

A valid deed of trust involves three parties:

1. The borrower, also known as the trustor.

2. The lender, also known as the beneficiary.

3. The trustee, which is typically a title company that holds legal title to the real property or, in some states, just holds the lien.

The deed of trust document typically contains the following information:

• The names of all the involved parties (borrower, lender and trustee).

• A description of the property.

• The original amount of the loan.

• Loan inception and maturity dates.

• Any fees or riders involved.

• What will happen in the event of loan default.

• Depending on the nature of the sale, any other relevant details.

Deed of trust vs. warranty deed

The main difference between a deed of trust and a warranty deed is that a deed of trust is a contract and a warranty deed is more like a certification. Specifically, a warranty deed is a document some lenders require before they approve financing. It certifies that the seller is the true owner of the property, has the right to sell it and that there are no outstanding debts, liens, judgments or encumbrances on the property. A deed of trust is a lending contract, while a warranty deed is offered by a seller to a buyer for the buyer’s protection.

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