What is the purpose of a deed of trust?

The purpose of a deed of trust is to reflect property as security for a debt. This legal document involves three parties: the borrower, the lender, and a third-party trustee. When a borrower takes out a loan to purchase real estate, the property itself is used as collateral; this means that if the borrower fails to repay the loan, the lender has a secured interest in the property. The deed of trust gives the lender the right to take possession of the property through foreclosure if the borrower defaults on the loan, allowing the lender to recover their investment. By using the property as security for the debt, the deed of trust plays a crucial role in protecting the lender’s interests while enabling the borrower to access financing for purchasing a home or property.

The other choices are unrelated to the primary function of a deed of trust, which specifically addresses issues of collateral and security in the borrowing process.