Trust Deed Definition and Legal Meaning
On this page, you'll find the legal definition and meaning of Trust Deed, written in plain English, along with examples of how it is used.
What is Trust Deed?
It is an agreement to prove that the real property and its title has been transferred to the named trustee (third party who is neutral) who would hold such assets till the time, the actual owner or the borrower repays debt. This is for the benefit of the lender and thus is also known as deed of trust which is also used as mortagage in some places
History and Meaning of Trust Deed
A Trust Deed is a legally binding agreement between a borrower and a lender that involves a third-party trustee. The trustee holds the borrower's property as collateral until the borrower repays the debt. If the borrower defaults on the loan, the trustee can take possession of the property and sell it to repay the lender.
Trust Deeds are often used in real estate transactions in the United States as a way to secure financing. Unlike mortgages, which require the borrower to transfer the property's legal title to the lender, Trust Deeds grant title to a neutral third-party trustee until the borrower fulfills their obligations.
Examples of Trust Deed
A homeowner takes out a loan from a bank to purchase a new home, and the bank secures the loan by having the borrower sign a Trust Deed granting the bank an interest in the title to the property.
A developer borrows money from a private lender to fund a commercial construction project, and the lender requires a Trust Deed to be signed granting the lender an interest in the title to the property being developed.
A farming family agrees to sell their farmland to a buyer who can’t pay for it all at once, and the family agrees to hold a Trust Deed for partial payment until the buyer repays the remaining balance.
Legal Terms Similar to Trust Deed
Mortgage - A loan secured by real estate that typically requires the borrower to transfer legal title to the lender until the loan is repaid.
Hypothecation - A legal term used to describe the pledging of assets (usually real estate) as collateral for a loan without actually transferring legal title.
Deed of Trust - An alternative to a mortgage that creates a three-party agreement between a borrower, a lender, and a trustee to manage and protect the collateral property.