A deed of trust is a legal document that gives a lender a security interest in your property as collateral for the loan. In Texas, it replaces the traditional mortgage used in most other states.
This document names three parties: you (the borrower/trustor), the lender (the beneficiary), and a trustee (typically a title company) who holds the legal title until the loan is repaid.
If you default on the loan, the trustee can foreclose on the property through a non-judicial foreclosure process. The deed of trust is signed at closing and recorded in the county records.
What a Deed of Trust Is
A deed of trust is a three-party agreement that creates a security interest in real property. You convey legal title to a trustee who holds it for the lender's benefit. As long as you make your payments, you retain full use and possession of the property. The trustee only steps in if you default.
How It Works in Texas
Texas is a deed-of-trust state. Instead of a two-party mortgage (borrower and lender), Texas uses this three-party structure. This matters because it allows for non-judicial foreclosure, meaning the lender does not have to go through the court system to foreclose. The process is faster and less expensive, governed by specific provisions in the Texas Property Code.
The Trustee's Role
The trustee holds legal title to the property until the loan is fully repaid. The trustee is typically a title company or an individual designated in the deed of trust. If you default, the trustee can initiate foreclosure following Texas law. The trustee must post notice, notify the borrower, and conduct a public auction on the first Tuesday of the month.
Deed of Trust vs Mortgage
The key difference is the number of parties involved. A mortgage involves two parties: borrower and lender. A deed of trust involves three: borrower, lender, and trustee. In mortgage states, foreclosures go through the court system (judicial foreclosure). In deed-of-trust states like Texas, foreclosures are typically non-judicial, which means the process can move faster.
Foreclosure Under a Deed of Trust
When you default, the trustee can exercise the power of sale. The trustee must post notice of the sale at the county courthouse for at least 21 days, send notice to the borrower, and hold the sale on the first Tuesday of the month between 10 a.m. and 4 p.m. The property is sold to the highest bidder. Any surplus after paying the loan and costs goes to the borrower.
When the Deed of Trust Is Released
Once you pay off the loan in full, the lender sends a release of lien to the county clerk. This document clears the deed of trust from the property's title, and you receive clear title. It is important to confirm with the title company and lender that the release has been properly recorded.