Warranty Deed vs Deed of Trust

A warranty deed and deed of trust can both appear during a real estate transaction, but they serve very different purposes. A warranty deed transfers a seller’s interest in property to a buyer and includes certain promises about the title. A deed of trust, by comparison, generally secures a home loan by giving the lender a security interest in the property. Understanding the difference can make it easier to identify which document establishes your ownership rights and which one relates to your obligation to repay the loan.

A financial advisor can help you consider how buying a home may affect your cash flow, investments and other long-term financial goals.

Warranty Deed vs. Deed of Trust at a Glance

A warranty deed and deed of trust are both legal documents that can be used in a real estate transaction, but they serve different purposes. A warranty deed is primarily used to transfer an ownership interest in real estate and provides certain warranties regarding the property’s title. A deed of trust, meanwhile, is a security instrument used to secure repayment of a loan with the property.

Feature	Warranty Deed	Deed of Trust
Primary purpose	Transfers a seller’s interest in real estate to a buyer with certain title warranties	Secures repayment of a loan using the property as collateral
Main parties	Grantor (seller) and grantee (buyer)	Generally trustor (borrower), beneficiary (lender) and trustee
Transfers property to the buyer?	Yes, it is used to convey the seller’s interest in the property	No, it is not the document that conveys the seller’s property to the buyer
Connected to a home loan?	Not necessarily	Generally yes
Provides title warranties?	Yes, although the scope depends on the type of warranty deed	No
Creates a lender security interest?	No	Yes
Can be used at closing?	Yes	Yes, when a deed of trust is used to secure the loan
What happens after the loan is paid off?	Paying off the loan does not eliminate the deed that conveyed the property	The security interest is generally released or reconveyed according to applicable state law

What Is a Warranty Deed?

A warranty deed is a legal document that is used when transferring ownership of property from a grantor (seller) to a grantee (buyer). The seller provides it and guarantees certain protections to the buyer.

The warranty deed guarantees to the buyer (and the buyer’s lender, if applicable), that the property:

Is owned by the seller, free and clear
Does not have any outstanding debts, including mortgages
Does not have any outstanding liens, judgments or encumbrances

A warranty deed affirms that the seller owns the property, has the right to sell it, and that no third parties can claim ownership. It is often issued as part of a title search and includes important details such as the address of the property, a description of the lot or parcel, information about the parties involved and the date of the transaction.

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Getting a Warranty Deed

When it comes to warranty deeds, there are two types you could encounter: a general warranty deed and a special warranty deed.

A general warranty deed guarantees everything mentioned above and affirms that the property has a clear, transferable title. Generating one of these typically involves an extensive title search. If a lien, judgement or other claim to the property is later found or brought forward, the grantor who issued the general warranty deed can be held liable.

A special warranty deed offers fewer guarantees. It affirms that the seller owns the property and intends to sell it but only covers liens or claims that arose during the seller’s ownership.

Special warranty deeds don’t offer any guarantees for the timeframe before the current seller owned the property. This means that a claim or old lien against the property could eventually surface and impact the new buyer. The seller who signed the special warranty deed is not liable, though, unless the claim in question relates to when they owned the property.

What Is a Deed of Trust?

A deed of trust is a different type of real estate document that you may receive when buying a home and can replace a mortgage loan in certain states. Essentially, this document is the buyer’s agreement to repay their mortgage lender according to the terms of their new home loan. A deed of trust is issued at closing, and involves three parties: the trustor (borrower), trustee (third-party who will hold the title; usually the title company) and beneficiary (lender).

Like a mortgage loan agreement, the deed of trust outlines key details. It includes the property description, loan amount, repayment terms, default consequences, fees and loan schedule.

When a lender issues a deed of trust, the borrower provides a promissory note in return. This note binds the buyer to repay the loan. Once the loan is paid off, the lender returns the note, marks it as paid and the trustee transfers the title to the buyer.

Using a Deed of Trust

Certain states use deeds of trust instead of mortgage loans:

Alaska
California
Colorado
District of Columbia
Georgia
Hawaii
Idaho
Maine
Massachusetts
Minnesota
Mississippi
Missouri
Nebraska
Nevada
New Hampshire
New Mexico
North Carolina
Oregon
Rhode Island
Tennessee
Texas
Utah
Virginia
Washington
West Virginia
Wyoming

In Alabama, Arizona, Arkansas, Illinois, Kentucky, Maryland, Michigan, Montana and South Dakota, lenders can choose to use either a deed of trust or a mortgage. In the remaining states, only a mortgage loan is allowed.

Bottom Line

Couple looks at the deed to their house.

A warranty deed and deed of trust serve different functions in a real estate transaction. A warranty deed transfers a seller’s interest in the property to the buyer and provides certain warranties regarding the title. A deed of trust, meanwhile, is a security instrument that generally secures repayment of a home loan and can give the lender the right to pursue foreclosure if the borrower defaults, subject to the loan terms and applicable law. Depending on where you live and how your purchase is financed, you could encounter both documents at closing.

A financial advisor can help you evaluate how a home purchase, mortgage payments and home equity fit into your broader financial plan.

Homebuying Tips

A financial planner can help you plan for a home purchase, including setting a budget and saving for your down payment. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area. You can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
As you think about buying a home, consider how your mortgage payments will fit into you monthly budget. SmartAsset has a mortgage calculator that can help you estimate your monthly payment and total interest you’ll pay. Meanwhile, our closing costs calculator can also give you a sense of how much you can expect to pay in extra fees.