Funding Loans on a Trust Deed vs a Promissory Note

    by Aditi Bansal

Updated on Dienstag, 20. Juni 2017

Private money lenders in real estate need a trust deed to secure their loans, and ensure the property does not transfer to a new owner before the loan is repaid.

tags  #Funding Loans  #Trust Deed #


The use of loans from private money lenders is quite common in real estate, with some investors in the industry relying almost entirely on private money loans to run their businesses. While working in the hard money lending business, you will come across quite a number of prime properties without trust deeds that require investors to use a promissory note as security.

As a lender, a promissory note does not give you the security you need to risk your finances. A promissory note serves as “a payment promise” and is often issued without any concrete records to back its legitimacy. As a private money lender, you need a mortgage or a deed of trust to make a payment on a promissory note. A deed of trust serves as a security document as it legitimizes the promissory note by ensuring there is a record of the trust deed at the county estates office. This record then acts as a lien on the property, so that any interest partied knows that there is money owed to the lender by the estate. Without the deed of trust, unscrupulous borrowers can easily sell off the property and run away with your loan money.

As an investor looking to offering private loans to real estate investors, friends or family, always ask for the deed of trust. If it is not available immediately, ask for a mortgage on the property to ensure the promissory note is secured and that the borrower will not run off with your money.

This page has a focus on Funding Loans, Trust Deed was shared by Aditi Bansal.

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