Trust Deed Investing

A trust deed investment is where an investor makes or purchases a loan to a borrower which is evidenced by a promissory note.

The loan is secured by a deed of trust (i.e. trust deed) that encumbers real property.

A trust deed or deed of trust (a.k.a. mortgage) is a document recorded with the county that creates a lien on the property; the lien secures the property as collateral to ensure the borrower's obligations under the promissory note.

A promissory note is a written promise to pay or repay certain amounts of money by a certain time (or in installments) to the note holder. Specified within the note:

  • Amount of the loan (principal)
  • Interest rate (interest)
  • Amount and frequency of payments (debt service)
  • When the borrower must repay the principal (maturity date)
  • Penalties imposed if borrower does not repay per agreement
  • How do you obtain a promissory note?

A lien priority indicates the order in which the creditors are paid when the assets of a borrower are liquidated; lien holders are paid in the order their claims were filed, starting with the earliest recorded lien.

 

To read more about trust deed investing, please see our Before You Invest page.

To view a list of Investors' frequently asked questions and answers, please see our Investor FAQs page.

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