What is the purpose of a deed of trust?

A deed of trust serves the primary purpose of securing a loan by using the property as collateral. In this arrangement, the borrower (trustor) conveys legal title to the property to a third party (trustee), who holds it for the benefit of the lender (beneficiary) until the loan is paid off. If the borrower defaults on the loan, the trustee has the authority to sell the property through a non-judicial foreclosure process, which allows the lender to recover the amount owed on the loan.

This mechanism provides security for the lender, as it ensures that there is a physical asset backing the financial obligation. By having the property as collateral, it not only mitigates risk for the lender but also gives the borrower access to funds needed for purchasing or refinancing a property.