Deed of Trust

• When a property buyer signs the deed of trust, he gives the title to the property to a trustee, which can be an attorney, a title company or an escrow company. When the property buyer finishes paying off the mortgage loan to the lender, the trustee gives the title back to the buyer. If the buyer fails to pay, the trustee gives the title to the mortgage lender and helps with the foreclosure process.
  
  

Closed-End Loan

• A closed end loan refers to a fixed-term loan that the borrower has to pay by the end of the term. The deed of trust loan is usually a fixed-term loan and the agreement for it is usually detailed in the deed of trust agreement. At the beginning of the loan, the lender can calculate the amount of interest it will charge over the life of the loan. The loan contract may detail the total amount of finance charge.
  
  

Early Payment

• With a closed-end loan, you usually make regular payments to eventually pay off the entire debt. If the borrower follows the payment schedule closely, he will finish paying off the loan at the end of the fixed loan term. Despite the fixed term, the borrower may choose to pay off the loan earlier than scheduled by making extra payments or adding more than required each payment. This has the effect of reducing his interest expense.
  
  

Non-Payment

• If the borrower misses his regular payments, the lender may contact the trustee to start the foreclosure process. The trustee may either go through court to foreclose or carry out a non-judicial foreclosure process instead. The non-judicial process takes a shorter time to complete, minimizing the lender's various costs, such as attorneys' fees, court charges and lost profits. As such, the lender can afford to afford extending future loans at lower interest rates than if the lender were to use a mortgage.