Real Property as Security for a Loan - Deed of Trust Template

Sep 1, 2026

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Guide explains how a deed of trust (trust deed) functions as security for a loan, including how it is used with a promissory note. It covers the three parties—beneficiary (lender), borrower(s), and trustee—and their roles in repayment and foreclosure. Step-by-step instructions describe preparing acceptable deed and note formats, obtaining notarization before recording, and submitting documents to the county recorder’s office with applicable fees.

LanguageEnglish

CategoryForms

FormatDOCX

Pages7

Reading Time3 min

AccessFree to download

Background

What a deed of trust is

Trust deed vs living trust

Step-by-Step Instructions

Step 1: Determine the parties

Beneficiary

Borrower(s)

Trustee

Step 2: Prepare the deed of trust and promissory note

Step 3: Get signatures notarized

Step 4: Record signed documents

deed of trust and promissory note Real Property as Security for a Loan HYPERLINK "https://saclaw.org/recording-deeds" Completing and Recording Deeds HYPERLINK "https://saclaw.org/wp-content/uploads/sbs-petition-for-release-of-mechanics-lien.pdf" Petition to Release Mechanics’ Lien HYPERLINK "https://saclaw.org/" Find all this information on our website at HYPERLINK "https://saclaw.org/" saclaw.org. Related Step-by-Step Guides This Guide includes instructions and sample forms in a format that the Sacramento County Recorder’s Office will accept. The Guide and related forms may be downloaded from: HYPERLINK "https://saclaw.org/deed-of-trust" saclaw.org/deed-of-trust. Background A deed of trust, also called a trust deed, is the functional equivalent of a mortgage. It does not transfer the ownership of real property, as the typical deed does. Like a mortgage, a trust deed makes a piece of real property security (collateral) for a loan. If the loan is not repaid on time, the lender can foreclose on and sell the property and use the proceeds to pay off the loan. Note: A trust deed is not used to transfer property to a living trust (use a HYPERLINK "https://saclaw.org/legal-forms/%20" Grant Deed for that). Other than the terminology, trust deeds and living trusts have nothing in common. A living trust is used to avoid probate, not to provide security for a loan. See the Law 101 page on Wills, Trusts, and Estate Planning on our website at HYPERLINK "https://saclaw.org/law-101/plan-estate/" saclaw.org/law-101/plan-estate/ for more information on that topic. A trust deed is always used together with a promissory note that sets out the amount and terms of the loan. The property owner signs the note, which is a written promise to repay the borrowed money. A trust deed gives the third-party “trustee” (usually a title company or real estate broker) legal ownership of the property. This means that the trustee has no control over the property as long as the borrower (aka property owner or “trustor”) makes the agreed-upon loan payments and keeps the other promises in the trust deed. If the borrower defaults, however, the trustee has the power to sell the property to pay off the loan without having to file an action in court. The lender (also known as “beneficiary”) is then repaid from the proceeds. Step-by-Step Instructions Step 1: Determine the Parties to These Agreements There will be three parties to these agreements. Identifying these parties ahead of time will make it easier to complete the forms. Beneficiary The beneficiary, more commonly known as the lender, is the person or company that lends the borrower money, and who will be entitled to be repaid from the proceeds of a foreclosure. If the lender is a corporation, be sure to include language such as “Lender is a corporation organized and existing under the laws of California” in your documents. Borrower(s) If there are two or more borrowers, they will be borrowing the money “jointly and severally.” This means each debtor is responsible (liable) for the entire amount of the debt. A creditor may collect from whichever debtor has the "deep pocket" (lots of money); the debtor who pays may demand contributions from the other debtors. Joint borrowers will want to carefully consider whether or not they wish to be jointly responsible with their co-borrower. When the property used as security for the loan is owned by more than one person, you may want to consider who you will name as borrowers and owners of the property on the deed of trust. The names of all owners of the property, and their spouses, must be included to give the entire property (all owners’ interests in the property) as security. A co-owner can only give as security his or her interest in the property. In other words, a lender wants to be sure that all owners and their spouses sign the deed of trust as a condition of lending the money (unless the lender is willing to take as security one co-owner’

FAQs

What is a deed of trust and how does it secure a loan?

A deed of trust is the functional equivalent of a mortgage and creates real property security for a loan. If the borrower defaults, the lender can foreclose, sell the property, and use proceeds to repay the loan.

How many parties are involved, and what roles do they play?

There are three parties: the beneficiary (lender), the borrower(s), and the trustee (often a title or trust company). The trustee holds legal ownership while the borrower performs the loan promises, and can sell the property if there is a default.

What steps are required to make the deed of trust effective for recording?

Prepare a deed of trust and promissory note in a recorder-acceptable format, obtain notarization of the trustor’s signature, and then record the signed and notarized documents with the county recorder’s office and pay the required recording fee.

Sep 1, 2026

Upload by Levi