A deed of trust is similar to a mortgage in that it secures the repayments of a real estate loan. While most states use mortgages, some states, such as California, more commonly use deeds of trust. A deed of trust expires and loses its validity after a certain amount of time has passed.
If you purchase a home with loan proceeds secured by a deed of trust, you enter into a three-party agreement. The lender extends funds to you and you agree to let the trustee hold the title to your property as security for the lender. If you default on your loan, the lender can get the trustee to foreclose on the property. After the trustee sells the property, he uses the proceeds to pay the lender.
If you finish paying off your loan, you no longer have any obligation to pay the lender, and the trustee gives you back the title to the property. This ends the deed of trust arrangement. As such, if you pay off the entire loan, the deed of trust naturally expires. The lender no longer has a lien against your property and you will not lose your home to the lender.
If you don't pay off your loan by the end of the loan term, the deed of trust continues to be valid. The lender can still collect the debt from you until a certain point. The time it takes for a deed of trust to expires varies depending on state laws and the specific circumstances. For example, in Arizona, the trust deed expires 10 years after the end of the loan term. But if there is no record of the end of the loan term, the trust deed expires 50 years after the start of the loan term.
If a deed of trust has expired, the lien has also lost its effectiveness. The lender or any other entity that has purchased the lien from the lender has no right to collect the debt recorded against the deed of trust. An expired deed of trust also can't bring about a foreclosure. If your property has a deed of trust that you suspect to have expired, you may be able to contact the lender, bring the case to court or post a corporate bond to clear title to your property.