If you own property in Arizona and have a home loan, the paper securing that loan is almost certainly a deed of trust, not a mortgage. Many people use the terms as if they mean the same thing. They do not. The legal gap between the two is real. It affects foreclosure, estate planning, and real estate deals.
How a Deed of Trust Works
A deed of trust involves three parties:
- Trustor: The borrower who owns the property and pledges it as security
- Beneficiary: The lender who gives the money
- Trustee: A neutral third party who holds the title until the loan is paid off. This is usually a title company, escrow agent, or lawyer.
The trustee holds the title as security for the lender. When the borrower pays off the loan in full, the trustee gives the property back. If the borrower defaults, the trustee can sell the property through a trustee's sale without going to court.
This process is called non-judicial foreclosure. It is governed by A.R.S. Title 33, Chapter 6.1. In Arizona, it usually takes about 90 days.
How a Mortgage Is Different
A standard mortgage involves only two parties: the borrower and the lender. There is no trustee. The borrower holds the title. The lender has a lien on the property.
If the borrower defaults, the lender must file a lawsuit. They go through judicial foreclosure. A judge oversees the process. This takes longer and costs more than a trustee's sale.
Arizona allows both tools. But lenders strongly prefer deeds of trust. The non-court foreclosure process is faster and cheaper.
Key Differences Side by Side
- Number of parties: Mortgages have two (borrower, lender). Deeds of trust have three (borrower, lender, trustee).
- Who holds the title: With a mortgage, the borrower holds the title. With a deed of trust, the trustee holds it until the loan is paid.
- Foreclosure: Mortgages need court foreclosure. Deeds of trust allow non-court foreclosure through a trustee's sale.
- Timeline: Court foreclosure can take six months to a year or more. A trustee's sale in Arizona takes about 90 days.
- Deficiency judgment: Under A.R.S. 33-814(G), some home deeds of trust do not allow deficiency judgments. Mortgages may allow them.
Why the Difference Matters for Estate Planning
When property secured by a deed of trust passes to heirs or is moved into a living trust, the deed of trust stays with the property. The duty to repay continues no matter who owns it. This is true for both mortgages and deeds of trust.
If the property is sold as part of an estate settlement, the lien must be paid off before the new buyer gets clear title. When property is sold through probate or trust handling, the personal rep or trustee manages this payoff.
Knowing whether your property is secured by a deed of trust or mortgage matters when you review real estate deals, refinance, or move property into a trust.
What Happens When the Loan Is Paid Off?
When the loan is paid off, the process is a bit different for each:
- Deed of trust: The trustee files a deed of reconveyance. This releases the property back to the borrower.
- Mortgage: The lender files a satisfaction of mortgage.
Either way, the goal is to clear the lien from the title. The owner then has full, free ownership.
The Bottom Line
Arizona is a deed of trust state. Most home loans here use the three-party setup. The daily impact for borrowers is small. But it matters a great deal if there is a default or when the property changes hands through an estate plan. Worth knowing before it matters.