Everything you need to Know about Deed of Trust

Everything You Need to Know about Deed of Trust

If you are one of those people who are not sure about what a deed of trust is all about, you are not alone. You have to keep in mind, that as an owner of a newly acquired real estate property, you sign a deed of trust at closing. There is a lot of paperwork to be dealt with at the closing, which makes it important for you to take your time and read them before you even considering signing. That being said, here are a few additional things to keep in mind about a deed of trust.

What is a Deed of Trust?

A deed of trust is not just a piece of paper, it is in fact a security for you loan. Additionally, the document is recorded and kept safe in public records at the same time. Essentially, a deed of trust comprises of three parties, which include:

  • The borrower, referred to as the ‘trustor’
  • The entity holding legal or bare title, referred to as the ‘trustee’
  • The lender, referred to as the ‘beneficiary’

The document serves as an instrument that identifies key elements of the agreement including the original amount of money borrowed, the different parties involved, legal description of the real estate property being secured for the mortgage and other details including the commencement and maturation of the loaned amount. Additionally, it covers additional factors including legal procedures, late fees and the requirements of the mortgage.

Who is a Trustee?

A lot of people find the deed of trust and mortgage to be quite confusing. This is primarily because a trustee is not required when you apply for the mortgage; however the same cannot be said about a deed of trust. The trustee is an independent third party that acts as nothing more than a neutral entity that does not represent the lender or the borrower.

Promissory Note and its Importance

As mentioned earlier, the deed of trust is a legal document that ensures security of the debt. This is made possible by securing any other property and promissory note is required as evidence of the debt actually existing in the first place. The note serves as a promise of payment, which is signed by the borrower and even contains key elements of the loan including payment obligation and interest rates.

Additional Factors to keep in Mind before Signing a Deed of Trust and Promissory Note

Before you actually go ahead and sign a deed of trust and the promissory note, there are some things that need to be kept in mind in order to make sure you are not in way over your head in the first place. You can start by reading the documents carefully and make sure it is exactly what you agreed upon. Moreover, there is no harm in checking for mistakes, important items to review include:

  • Trustor’s name
  • Balance of the loan
  • Amount that needs to be paid
  • Interest rates agreed upon
  • Physical address of the property
  • Any and all, prepayment penalties

Now that you know everything there is to know about deed of trust, you will be able to make more effective decisions that are in your favor. However, if you are not sure about something in particular, there is no harm in asking for help or seeking professional assistance.