A deed of trust is similar to a mortgage agreement in that it represents a lender's interest in a piece of real estate. Typically, a deed of trust has a maturity date on which it is to be paid in full. When that date arrives, following best practices, the lender will send documentation to the government office in which the deed was filed to indicate its changed ownership status. If this fails to happen, it can cause headaches with regard to transferring the property at some point down the line, which is one reason states have individual mandates with regard to expiration dates on deeds of trust.
A deed of trust expires can and will expire based upon one of two specific timelines. The deed can either expire at a designated point follow the maturity date or, in the absence of this information, exactly 35 years after the date on which the deed had been recorded.
The Difference Between Deeds of Trust and Mortgages
A deed of trust is an agreement between a lender, borrower and trustee and may be used in place of a traditional mortgage process. The trustee holds the money securing the real property and has authority to enforce the terms of the loan agreement, and may actually hold the title to the property being purchased. In a traditional mortgage, the loan agreement is usually between a bank and a borrower, with the bank serving as the lien holder until the mortgage terms have been met, in which case ownership is remanded to the buyer. The primary difference between a mortgage and a deed of trust is that a trustee often has the ability to foreclose on a property in a more expedient manner than a bank. This is usually a better circumstance for a lender than a borrower.
Why Deeds of Trust Expire
Due to the fact that an extra step is required with documenting a debt paid in full and a change of ownership, deeds of trust may not always be fully executed at the end of the loan period. This can lead to confusion if the property changes hands, is sold or inherited and no provision has been made to fully transfer the ownership, even after the deed of trust has matured. This is why individual states mandate expiration of deeds of trusts at varying time periods, often several years after the deed is anticipated to have been fulfilled.
How to Protect Yourself
Many people don't even realize there is a problem with a deed of trust until they attempt to close on a property and a title search shows a deed of trust was not documented or properly filed. Working with a title company and purchasing title insurance can help ensure appropriate research is conducted on your behalf. You can also check you state's policy on deed of trust expiration practices through your state's department of housing.
- LII: Deed of Trust
- LII: Property - State Statutes
- Sandy Gadow: What Is The Difference Between A Mortgage And A Deed of Trust?
- Washington Post: These Common Title Problems Can Snag Your Home Closing
- American Bar Association. "Commercial Real Estate FAQs: What Is the Difference Between a Mortgage and a Deed of Trust?" Accessed July 31, 2020.
- Cornell Law School. "Deed of Trust." Accessed April 6, 2020.
- Consumer Financial Protection Bureau. "Deed of Trust." Accessed July 5, 2020.
- American Bar Association. "Glossary of Real Estate Terms: Deed of Trust." Accessed July 31, 2020.
- Consumer Financial Protection Bureau. "How Does Foreclosure Work?" Accessed July 5, 2020.
- American Bar Association. "Mortgage Note -- Deed of Trust Note." Accessed July 31, 2020.
Lisa McQuerrey has been an award-winning writer and author for more than 25 years. She specializes in business, finance, workplace/career and education. Publications she’s written for include Southwest Exchange and InBusiness Las Vegas.