What is a Deed of Trust?

A Deed of Trust is indeed a legal document that serves as security for a mortgage loan. It is a critical component of the real estate financing process in Texas and many other states. The Deed of Trust establishes a trust arrangement wherein the borrower (trustor) conveys an interest in the property to a third party (trustee), who holds that interest on behalf of the lender (beneficiary). This legal framework provides the lender with a measure of security in the event that the borrower defaults on the loan, allowing the trustee to initiate foreclosure proceedings on the property.

Understanding the purpose of a Deed of Trust is essential, as it differs significantly from other documents involved in real estate transactions. For instance, it does not transfer ownership of the property to the lender outright; rather, it creates a security interest in the property while allowing the borrower to retain ownership. This is a key aspect that distinguishes it from other options like transferring property ownership or simply outlining loan payment terms. Additionally, the Deed of Trust is also not a document that records property taxes, which is handled through separate legal channels.