Trust Deeds work the same way as home mortgages, acting as a loan with a lien on the home until the loan is paid in full. Trust Deeds are slightly different then mortgages and each state differs on if they use mortgages or Trust Deeds.
Trust Deeds, also referred to as Deeds of Trust, are sometimes preferred over mortgages since they last for only a few years instead of decades like most mortgages. Trust Deeds also require three entities where mortgages need two, and rely on a non-judiciary foreclosure method which eliminates the need of the courts. The three parties needed for a Deed of Trust are the Trustee, Trustor, and Beneficiary. The Trustee is responsible for the deed to the home or property and will relinquish the deed to the Trustor when payments are complete, or to the Beneficiary should the Trustor fail to make all payments. Should the Trustor fail to make payments then the home will go into foreclosure. Unlike mortgages, Deed of Trusts do not rely on the courts for the foreclosure procedures which eliminates much of the time and hassle often involved in these cases.
To establish a Deed of Trust you will need two forms the Promissory Note and the Deed of Trust itself. These two documents are crucial to the process of receiving the loan and understanding the terms and conditions of the agreement.
The Promissory Note is a written promise signed by the Trustor acknowledging the loan and the debt. The Promissory Note will have the sum of the loan along with the interest rate, which the loan is to be paid back at, and the amount of the monthly payments. The Promissory Note will remain in the Beneficiary’s possession so you will want a copy on the day of the signing.
The Deed of Trust itself transfers the title to the Trustee for the remainder of the debt. Trustors are advised to find a third party Trustee that will act in the best interest of both the Beneficiary and the Trustor. There are several companies and organizations willing to act as Trustee in Deeds of Trust cases. Whoever holds the title to the property will be able to sell the home should payments go into default in order to recover the money lost.
These forms, the Promissory Note and the Deed of Trust form, can be found in several locations on the internet, either for free or for a small fee. Most of these documents accurately represent what the actual state approved documents look like and are a great way to acclimate yourself to the terminology and appearance of the forms. Your lender will also have the forms needed and many find it convenient to use the forms that the lender provides.
A Deed of Trust is often the answer to financial woes but should be used in a responsible manner. Defaulting on payments can result in the loss of your home and economic security. The forms of the Deed of Trust procedures can be found online or at the lender's office. Make sure you study the forms and understand the phrases, which will provide you with a greater amount of confidence so you can get that better deal.
What is a deed of trust? You may have joined the many that have asked this question when purchasing a home and taking out a mortgage. One way of describing or defining a deed of trust is as the security for your loan. When you purchase a home, you have a mortgage that describes the real estate. Your name is listed as the owner of this real estate. If you need to take out a loan to purchase this real estate (as most people do), you also have to sign loan documents listing all important information having to do with the loan. The information on the loan documents will include the dollar amount that you borrowed, the loan terms such as interest rate, length of loan, monthly payment amount, your signature and the bank's.
You're probably still asking, "What is a deed of trust?" When you sign the loan documents and the mortgage, you get one copy of the loan documents and the bank keeps another copy. The mortgage that you've signed is what they show you when you ask "What is a deed of trust?" This document is what is sent to your local register of deeds office to be recorded until such time as the loan is fully paid off. The deed of trust is the security for your loan and is recorded in your local public records office.
The deed of trust consists of three different parties involved: the trustor, the trustee and the beneficiary. The borrower, which is you, is considered the trustor. The beneficiary is the bank or lending institution that borrowed you the money. The trustee is the register of deeds or public office which holds the legal title to your real estate. A deed of trust is a legal binding document. If you're asked to sign a deed of trust and aren't sure what is a deed of trust, be sure to have them thoroughly explain everything to you.
The deed of trust will usually list the original amount of the loan, the legal description of the real estate being used as security, all individuals involved, and the start and maturity dates of the loan, any mortgage provisions, legal procedures, late fees or mortgage terms. While a deed of trust has a trustee, a mortgage does not, which often results in confusion between a deed of trust and a mortgage.
There are websites that can help you learn all about deeds of trust and mortgage so you'll never have to ask, "What is a deed of trust?" if asked to sign one. Always make sure you know what you're signing, especially since it involves your home and property.
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