Many homeowners think the only people involved in their mortgage are them and the bank. However, this is not usually the case as most loans also have a trustee who has engaged in the process of trust deed investing as a way to build an investment portfolio.
When a mortgage is approved, underwritten and recorded, many people imagine that there
are only two parties working together, the bank and the borrower. However, this
is not usually the case. In most mortgage transactions, there is a third party
who works behind the scenes called the trustee. The trustee engages in
something called trust deed investing
by purchasing a promissory note from the lender. The trustee then holds the legal title to the property on behalf of the bank. The bank pays the trustee interest to hold the title on its behalf.
You may find yourself wondering, why would the bank do this? Why pay money to someone to
hold onto a piece of paper for you? The bank engages in trust deed investing
to help protect its assets in the event of default. If a borrower defaults on a mortgage, the bank has to take them to court to foreclose on the property and get its money back. This is a long, expensive
process and there is always the possibility that they bank may lose. However,
if the mortgage loan has a trustee who holds the title, the trustee can
foreclose on the property on behalf of the bank. This can be done without a
court hearing and is a much faster process. Once the foreclosure is complete,
the lender will get its capital back and any remaining funds are paid to the
trustee and finally the borrower.
If trust deed investing sounds intriguing, there are a few ways to get started. The first and most important step is to find a private mortgage company or investment firm that loans on promissory notes. From here, you should be able to decide how much you want to invest. You
can purchase an entire deed as a single investor. This is one of the safest
ways to invest because you are the only investor that needs to be paid back in
the event of default.
If investing in the full deed is out of your budget, there are still ways to get into trust deed investing
. You can invest as a fractional investor and buy a portion of the deed. If this is your plan, finding the right broker is crucial. Depending on whether you are the first
investor, your investment may be less safe. Your investment professional can
work with you to explain how to purchase a first deed of trust vs. a second
deed of trust. This is important because a first trust deed holder is the first
investor paid back in the event of default. If you are a second deed holder,
you are at a higher risk for losing some or all of your investment.
Your private lender should be able to fully explain all of the risks to you and help you make the right choice when it comes to trust
If trust deed
investing sounds like an investment option you want to explore, give us a
Here at Level 4 Funding we specialize in alternative investment strategies like trust deed investments
. Our financial professionals can help explain the process and answer any questions you may have. We will also make sure that you know all the risks and benefits so you can make an informed decision about how to invest your money. Call us today for sound
financial advice and to get started trust deed investing
NMLS 1057378 | AZMB 0923961 | MLO 1057378
23335 N 18th Drive Suite 120
Phoenix AZ 85027