What is a Deed of Trust primarily used for?

A Deed of Trust is primarily used for creating a security interest in real estate. It serves as a legal document that secures a loan by giving the lender a claim against the property in case the borrower defaults on their obligations. In a typical transaction involving a Deed of Trust, the borrower retains the title to the property while transferring the authority to the trustee to hold the title until the loan is repaid. This means that while the borrower is still the owner, the lender has a secured interest, which allows them to foreclose on the property if necessary.

The mechanism of a Deed of Trust integrates the roles of the borrower, lender, and trustee, forming a three-party agreement that is distinct from traditional mortgages, which usually involve just two parties. This structure can provide added protection for lenders, as it simplifies the foreclosure process compared to a mortgage scenario.

Other choices reflect different functions entirely; for instance, transferring title ownership generally involves a warranty deed or quitclaim deed. Property insurance arrangements fall under the scope of insurance contracts rather than any form of title documentation, while property tax benefits are related to taxation laws and do not involve securing a loan or interest in property. Therefore, the primary function of a Deed of Trust clearly emphasizes its role