Title: Deed of Trust: How a Loan Is Secured by Land in North Carolina | FOUND

Description: A deed of trust secures a loan with land through three parties: borrower, trustee, and lender. Recording, priority, payoff, and foreclosure in North Carolina.

Canonical: https://lotsfound.com/insights/deed-of-trust/

# Deed of trust: how a loan is secured by land in North Carolina

A deed of trust is the document that makes land the security for a loan. The borrower conveys title to a trustee, who holds it for the lender until the debt is paid. In North Carolina it is the usual security instrument, and it allows foreclosure by power of sale before the clerk of court.

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In this article

1. [What a deed of trust is](#what-a-deed-of-trust-is)
2. [The three parties](#the-three-parties)
3. [How it differs from a mortgage](#how-it-differs-from-a-mortgage)
4. [Recording and priority](#recording-and-priority)
5. [Satisfaction and cancellation after payoff](#satisfaction-and-cancellation-after-payoff)
6. [Foreclosure by power of sale](#foreclosure-by-power-of-sale)
7. [Who prepares and reviews it](#who-prepares-and-reviews-it)
8. [Key recap](#key-recap)
9. [Questions](#questions)
10. [References](#references)

> **Quick summary:** This guide explains what a deed of trust is, who the three parties are, how recording sets priority, how the lien is cancelled after payoff, and how power-of-sale foreclosure works before the clerk of court. It is for land buyers, borrowers, and sellers who carry a note. The key takeaway: the deed of trust, not the promissory note, ties the debt to the land, and the record shows it until a satisfaction is recorded.

## What a deed of trust is

A deed of trust is a recorded instrument that makes real property the security for a debt. The debt itself is usually set out in a separate promissory note. The deed of trust gives the lender a way to sell the land if the note is not paid.

In North Carolina, the deed of trust is the standard tool. A UNC School of Government [manual on foreclosure](https://www.sog.unc.edu/sites/www.sog.unc.edu/files/course_materials/T06-06%20-%20SMITH-130%20Foreclosures%20under%20Power%20of%20Sale%20%28Final%20August%202012%29.pdf) states that deeds of trust, rather than mortgages, are used almost exclusively in the state. You will hear people call a home loan a "mortgage." The recorded document is almost always a deed of trust.

## The three parties

A deed of trust has three parties, where a mortgage has two. The School of Government [manual](https://www.sog.unc.edu/sites/www.sog.unc.edu/files/course_materials/T06-06%20-%20SMITH-130%20Foreclosures%20under%20Power%20of%20Sale%20%28Final%20August%202012%29.pdf) describes them this way:

| Party | Also called | Role |
|---|---|---|
| **Borrower** | Trustor, grantor, debtor | Owns the land and conveys legal title to the trustee as security |
| **Trustee** | Substitute trustee, after a substitution | Holds title in trust for both the borrower and the lender, and can conduct a sale on default |
| **Lender** | Beneficiary, holder, mortgagee | Holds the note and can ask the trustee to foreclose |

The borrower keeps possession and use of the land. The trustee's title exists only to secure the debt. When the debt is paid, the security ends.

## How it differs from a mortgage

A mortgage is a two-party instrument between the borrower and the lender. A deed of trust adds the trustee as a neutral third party. The School of Government manual gives one reason the third party matters: with a trustee in place, the lender can bid on and buy the land at the foreclosure sale.

Both instruments can carry a power of sale, and North Carolina's foreclosure statutes treat them alike for most purposes. The difference you see in practice is the form of the recorded document and the person who runs the sale.

## Recording and priority

A deed of trust protects the lender against later buyers and creditors only from the time it is recorded. Under [Section 47-20](https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_47/GS_47-20.html), no deed of trust is valid to pass any property against lien creditors or purchasers for value from the grantor except from the time of registration.

The same section sets priority by the order of registration. Unless a recorded instrument says otherwise, the first deed of trust registered comes first. When two instruments are registered at the same time, the statute presumes priority by the earliest document number, or by book and page when no document number appears. That presumption is rebuttable.

Priority matters on land with more than one loan. A seller who carries a note behind a bank loan holds a second position. A recorded subordination agreement can change the order. See [Owner financing land: how a seller carries the note](/insights/owner-financing-land/) for how a seller's note is set up.

> **The short version:** The note is the promise to pay. The deed of trust ties that promise to the land. Recording sets the order in which lenders are paid, and only a recorded satisfaction clears the lien from the record.

## Satisfaction and cancellation after payoff

A paid deed of trust stays on the record until a satisfaction is recorded. Chapter 45, Article 4 sets the rules.

**The lender's duty.** Under [Section 45-36.9](https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_45/GS_45-36.9.html), a secured creditor must submit a satisfaction for recording within 30 days after it receives full payment or performance. A loan that secures a line of credit or future advances also needs a request to end the line. A creditor that misses the deadline is liable to the landowner for actual damages. After a written demand and a further 30 days, the statute adds 1,000 dollars plus reasonable attorneys' fees and court costs.

**What a satisfaction says.** Under [Section 45-36.10](https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_45/GS_45-36.10.html), a satisfaction identifies the instrument, its original parties, and its recording data. It states that the signer is the secured creditor, contains language ending the instrument's effect, and is signed and acknowledged.

**Other ways to clear the record.** [Section 45-37](https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_45/GS_45-37.html) also allows an affidavit of satisfaction, or a trustee's satisfaction for a deed of trust.

A paid loan whose deed of trust was never cancelled still shows on the record. A title search finds it. See [Title search for land: what it finds and who does it](/insights/title-search-for-land/).

> **Take action:** Before you buy, have the record searched for every unsatisfied deed of trust on the parcel, and ask how each one will be paid at closing. Start with [One parcel. Everything the record says, in order.](/services/parcel-brief/)

## Foreclosure by power of sale

Most North Carolina foreclosures run under the power of sale in the deed of trust, through a hearing before the clerk of superior court. The School of Government manual notes that foreclosure by civil action is rare.

The steps, in outline:

1. **Notice of hearing.** Under [Section 45-21.16](https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_45/GS_45-21.16.html), the trustee files a notice of hearing with the clerk. It is served on the borrower, the record owners, and others the statute names, at least 10 days before the hearing.
2. **The clerk's findings.** The clerk authorizes the sale only on finding a valid debt held by the party seeking to foreclose, a default, a right to foreclose under the instrument, and proper notice. Home loans need pre-foreclosure notice too, and military service can bar a sale.
3. **Appeal.** A party may appeal the clerk's ruling to a judge within 10 days.
4. **Sale and upset bids.** After notice of sale, the trustee holds a public sale. Under [Section 45-21.27](https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_45/GS_45-21.27.html), the sale stays open for upset bids for 10 days after the report of sale or the last upset bid.

A pending foreclosure is also a reason a notice of the suit may appear in the clerk's records. See [Lis pendens: what a notice of a pending lawsuit does to land](/insights/lis-pendens/).

One rule matters to sellers who finance a sale. Under [Section 45-21.38](https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_45/GS_45-21.38.html), when a deed of trust secures the balance of the purchase price, and the note shows that on its face, the holder may not get a deficiency judgment after a power-of-sale foreclosure. What that means for a specific note is a question for a North Carolina attorney.

## Who prepares and reviews it

In a typical closing, a North Carolina attorney prepares the deed of trust, and the register of deeds records it. The lender sets the loan terms. A borrower who wants to know what a clause does, or how foreclosure applies to a given loan, asks a North Carolina real estate attorney. Loan terms and financing questions go to the lender. See [Land loans: how financing raw land works](/insights/land-loan/).

## Key recap

- A deed of trust secures a promissory note with land. In North Carolina it is the usual security instrument, rather than a mortgage.
- It has three parties: the borrower, the trustee who holds title as security, and the lender.
- Under Section 47-20, it protects the lender from the time of recording, and priority follows the order of registration.
- After payoff, the lender must submit a satisfaction for recording within 30 days under Section 45-36.9.
- Foreclosure usually runs by power of sale after a hearing before the clerk of superior court under Section 45-21.16.

## Questions

### Is a deed of trust the same as a mortgage?

No. A mortgage has two parties, the borrower and the lender. A deed of trust adds a trustee who holds title as security. In North Carolina, the recorded instrument for most loans is a deed of trust.

### Who holds the title under a deed of trust?

The trustee holds legal title as security, in trust for the borrower and the lender. The borrower keeps possession and use of the land and is the owner of record for most purposes.

### How do I get a deed of trust off my property after I pay the loan?

The lender must submit a satisfaction for recording within 30 days of full payment. If it does not, North Carolina law allows an affidavit of satisfaction and gives the landowner a claim against the lender. A closing attorney handles the paperwork.

### Can a lender foreclose without going to court?

The lender does not file a lawsuit in a power-of-sale foreclosure, but the clerk of superior court holds a hearing and must make findings before the sale. Either side may appeal the clerk's ruling to a judge.

## References

Primary sources cited on this page, in APA style.

- N.C. Gen. Stat. § 45-21.16 (2025). [https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_45/GS_45-21.16.html](https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_45/GS_45-21.16.html)
- N.C. Gen. Stat. § 45-21.27 (2025). [https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_45/GS_45-21.27.html](https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_45/GS_45-21.27.html)
- N.C. Gen. Stat. § 45-21.38 (2025). [https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_45/GS_45-21.38.html](https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_45/GS_45-21.38.html)
- N.C. Gen. Stat. § 45-36.10 (2025). [https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_45/GS_45-36.10.html](https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_45/GS_45-36.10.html)
- N.C. Gen. Stat. § 45-36.9 (2025). [https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_45/GS_45-36.9.html](https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_45/GS_45-36.9.html)
- N.C. Gen. Stat. § 45-37 (2025). [https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_45/GS_45-37.html](https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_45/GS_45-37.html)
- N.C. Gen. Stat. § 47-20 (2025). [https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_47/GS_47-20.html](https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_47/GS_47-20.html)
- UNC School of Government. (2012, August). *Foreclosure under power of sale* (Chapter 130). [https://www.sog.unc.edu/sites/www.sog.unc.edu/files/course_materials/T06-06%20-%20SMITH-130%20Foreclosures%20under%20Power%20of%20Sale%20%28Final%20August%202012%29.pdf](https://www.sog.unc.edu/sites/www.sog.unc.edu/files/course_materials/T06-06%20-%20SMITH-130%20Foreclosures%20under%20Power%20of%20Sale%20%28Final%20August%202012%29.pdf)

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