The reason I’m writing about this blog is because he clearly explain what is an “All Inclusive Trust Deed“.  To make a long story short, this kind of deed of trust secures a wrap-around loan, which loan incorporates an existing loan, with a new loan made by the Seller of a property.

Here is his example:

“For example , the sales price is $200,000, there is an existing first trust deed securing a loan with a balance of $150,000, with an interest rate of 7%, the Buyer has $20,000 cash to put down; therefore, an AITD is created in the amount of $180,000 at 8%. The AITD wraps around the existing $150,000 at, and the Seller makes 1% on the $150,000 at 8%, on the $30,000, thereby effectively increasing the yield.

The Buyer makes payments based upon the $180,000 balance, and the Seller makes the payments on the existing loan secured by the first trust deed.

The terms of the AITD, such as rates, maturity date, payment amount, late charges and prepayment penalty are completely negotiable.

In the event the first trust deed and note contains a “Due On Sale Clause,” the parties will want to seek legal and tax counsel as to the ramifications of doing an AITD.”

An AITD is also known as a wrap-around loan. This means that a preexisting loan is absorbed into a fresh loan that is made by a property’s seller. AITD is a “Subject To” transaction in which the seller also carries back from the buyer a promissory note as part of the purchase price secured by a junior trust deed on the property.

Generally, the buyer makes payments to the seller (or collection account) in an amount sufficient to pay any senior loan and the seller. The seller (or the collection account) is then required to make payments on any senior loan with the balance going to the seller on the junior loan.