A deed of trust is a legal document that transfers ownership of real property (real estate) to a trustee until the person or entity buying the real property repays a loan for the purchase of the real property. A deed of trust is similar to a mortgage—some states use a mortgage and other states use a deed of trust.

In a deed of trust transaction a lender (the bank) gives a borrower (who is purchasing the real property) money to pay the seller, and the borrower gives the lender one or more promissory notes for repayment of the loan. As security for the promissory notes, the borrower transfers the ownership interest (title) in the real property to a trustee—often a title company—to hold until the borrower repays the lender.

If the borrower fails to timely make payments and defaults on the loan, the property generally may be sold without the lender using or going through the court system. This is known as nonjudicial foreclosure and is usually less time-consuming and less expensive for the lender.

A deed of trust is also known as a trust deed, a trust indenture, an indemnity mortgage, or a common-law mortgage.

In Massachusetts, the typical instrument used for securing a loan for the purchase of real estate is a mortgage, not a deed of trust. When a borrower takes out a loan to buy property, they sign a promissory note and a mortgage. The mortgage creates a lien on the property as security for the loan. If the borrower defaults on the loan, the lender may initiate foreclosure proceedings to sell the property and recover the owed amount. Unlike states that use deeds of trust, which often allow for nonjudicial foreclosure, Massachusetts requires judicial foreclosure, meaning the lender must go through the court system to foreclose on the property. This process provides certain protections for the borrower, including the right to receive notice and the opportunity to be heard in court before foreclosure can occur.