All-Inclusive Trust Deed (AITD)

In depth

An AITD, common in California and other deed-of-trust states, allows a seller to wrap their existing financing inside a new trust deed given to the buyer. The buyer makes one payment to the seller or a servicer, who continues paying the underlying lender. Functionally identical to a wraparound mortgage, the AITD is structured around trust deeds rather than mortgages. Misconception: an AITD does not extinguish the original loan; the underlying lender can still call the note under a due-on-sale clause if discovered. Practically, AITDs are used to capture an interest-rate arbitrage when the underlying loan rate is far below market. A neutral servicer handling both legs of the payment is strongly recommended, and buyers should obtain title insurance reflecting the AITD's priority position.