
If you are buying a new property and taking out a mortgage, you may be advised that you have to purchase a lender’s title insurance policy. This is put in place to protect the lender’s interests and is often a condition of your loan. But, what is it — and is it necessary?
Here is everything you need to know about lender’s title insurance.
What is Lender’s Title Insurance?
When your bank agrees to give you a loan to purchase your property, they are taking a risk.
Underwriters will always protect the lender by weighing the risks concerning your credit score and employment history before approving your application. It is the unknown risks that make the need for protection even greater. And those come in the form of title issues.
The title to your property is your ownership rights. Many issues can arise that jeopardize these rights — and this can put your lender’s investment at risk.
During the homebuying process, a title search will be performed to ensure that the title is free and clear. The goal is to make sure that the seller has the legal right to sell the property and that there are no other title issues.
With a lender’s title insurance policy in place, they can feel confident that should something happen with you and your new property due to a title defect, they will not lose out on getting their money back for the loan.
What Does Lender’s Title Insurance Cover?
It is important to note that title insurance protects against things that happened in the past before you became the owner, not new title issues. Still, each lender’s title insurance policy will have a different set of specifics that it will cover.
Below are a few of the most common coverages of this title insurance.
Outstanding taxes
Old lawsuits that challenge seller’s claim
Unpaid contractor claims
Fraudulent deeds
Forged documents
Seller impersonation
Boundary or survey disputes
Judgments and liens
Undisclosed easements
Encroachments
Discuss the specifics of your coverage with your title company.
Lender’s Title Insurance vs. Owner’s Title Insurance
All title insurance policies are not created equal. You may be advised that you are required to purchase a lender’s title insurance policy, but what about an owner’s title insurance policy? What is the difference?
As its name suggests, an owner’s title insurance protects the new owner of the property. It is put in place to shield the owner from a catastrophic loss should any title issues arise once the property transfer takes place. This does not protect the lender in the same way that a lender’s title insurance policy does not protect the owner.
These policies are two different policies that protect two different sets of people. If you want to protect yourself, you will want to have both policies in place.
How Much Does a Lender’s Title Insurance Policy Cost?
The cost of a lender’s title insurance policy will vary. Typically the premium is calculated as a percentage of your loan amount. The good news is that once you pay for your title insurance, you won’t have to pay again.
The cost of a lender’s title insurance policy will be included in your closing costs. Once you pay this premium, your lender will have coverage until your mortgage is completely satisfied.
Still Have Questions About Lender’s Title Insurance?
At Blue Pointe Title Agency, we understand that title insurance can be difficult to understand. That’s why we are always available to answer any questions you may have — especially when it comes to protecting your property.
Contact us today!
Comentários