A formal agreement for loan repayment between the buyer and lender in a real estate transaction, signed at closing
The Deed of Trust (or DOT) is a formal agreement for loan repayment between the buyer and lender in a real estate transaction, signed at closing. The Deed of Trust transfers legal title to a third-party trustee (such as a bank) and equitable title to the borrower.
Legal title is ownership to control the property according to the law; equitable title is a person’s right to obtain full (legal) ownership of the property. The bank (trustee) holds legal title, thus giving them the right to transfer ownership to another party if the buyer defaults on their mortgage loan. The DOT will remain until the loan is repaid in full and therefore holds the borrower to repay their mortgage loan.