A Deed of Trust is a legal document that secures a loan by transferring the title of a property to a third party, known as the trustee, for the benefit of the lender. It is commonly used in real estate transactions as a means of financing, and can be thought of as an alternative to a mortgage.
In a Deed of Trust, the borrower (also referred to as the trustor) conveys the legal title of the property to the trustee, who holds it in trust until the loan is paid off. The lender (beneficiary) has a security interest in the property, enabling them to foreclose on the property if the borrower defaults on the loan.
The process typically involves the following steps:
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Execution: The borrower, lender, and trustee sign the Deed of Trust, detailing the loan amount, interest rate, repayment terms, and other conditions.
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Recording: The Deed of Trust is recorded in the county real estate records, establishing the lender’s security interest in the property.
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Payment: The borrower makes regular payments to the lender, usually including principal and interest.
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Release: Once the loan is fully repaid, the trustee will execute a reconveyance deed, transferring the title back to the borrower, thereby releasing the lien on the property.
In the context of Texas, particularly in Houston and its surrounding areas, the Deed of Trust is the predominant method of securing real estate loans, as mortgages are less common. Texas law governs the terms and execution of these documents, providing specific guidelines on foreclosure processes which can be faster than in some other states.