What is a Deed of Trust? (Legal Definition + Examples) | Summary and Q&A

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December 7, 2022
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The Real Estate Lawyer
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What is a Deed of Trust? (Legal Definition + Examples)

TL;DR

A deed of trust is a legal document in North Carolina that secures repayment of a loan by pledging real estate, allowing the lender to foreclose if the borrower fails to pay.

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Questions & Answers

Q: What is the purpose of a deed of trust in North Carolina real estate?

A deed of trust serves as a security instrument, allowing a borrower to pledge real estate as collateral for repaying a loan to the lender. It provides the lender with the right to foreclose if the borrower fails to make payments.

Q: How does a deed of trust differ from a regular deed?

While a regular deed transfers legal title to the property, a deed of trust acts as a security instrument. It does not transfer title but grants the lender the right to foreclose if the borrower defaults on the loan.

Q: Who is the trustee in a deed of trust?

The trustee is a party designated by the lender who holds title to the property until the loan is paid off. They are responsible for carrying out foreclosure in the event of default.

Q: What happens to the deed of trust once the loan is paid off?

Once the loan is paid off, the deed of trust is canceled, and the borrower receives clear title to their property. There are no longer any encumbrances from the lender.

Summary & Key Takeaways

  • A deed of trust is a security instrument in which a borrower pledges real estate as collateral for repaying a loan to the lender.

  • It is different from a deed, as a deed transfers legal title to the property, while a deed of trust serves as a security instrument.

  • In North Carolina, a deed of trust involves three parties: the borrower, the lender, and the trustee responsible for carrying out foreclosure in case of default.

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