Major keys to the success of being a homeowner include knowing what policies will help protect your properties and finances.
Title insurance is a protection policy against loss which may arise from problems connected to the title of the property that you are purchasing.
The home and the land you’re looking to buy may have had several ownership changes. Issues surrounding any of these ownerships may surface at any point. For example, a former owner may not have paid real estate taxes, or a contractor may say he wasn’t paid for his work done on the home before you purchased it. Title insurance protects the insured party from past legal issues and will cover monetary losses up to the amount of the policy.
There are two types of title insurance policies: lender and owner. Lender policy is required on all mortgages. It protects the lender’s interest in the property – the mortgage. Owner policy, however, is optional and protects the owner’s interest - the property.
Won’t the lender’s policy cover me? Not necessarily. The lender policy will only cover the lender’s loss, up to the value of the mortgage. An owner policy would cover the value of the property which is likely much higher than the loan value.
What is actually covered? The policy protects against any liens or other claims against the property that may have occurred in the past up to the day the policy was issued.
How long am I protected? The lender is protected until the loan is paid off. With an owner policy, you are protected as long as you or your heirs own the title. When you sell, the buyer will be required to purchase a new policy to cover any liens or claims that may creep up since the issue date of the previous policy.
If you are refinancing, your original owner policy will cover you as long as you continue to own the title. A new lender policy will most likely be required as the original lender policy terminates when the loan is paid off.
How often do I have to pay premiums? It’s a single payment made at closing.
Why do costs vary between title insurance companies? Like any insurance policy, different companies and policies cover different things. One policy may only cover the actual damages of the claim, while another policy may include coverage of court fees and paperwork.
Do I have the right to shop and choose my title insurance? Yes, but few buyers do. Most leave it up to their real estate agent, lender or attorney to select the carrier. You may be able to save money by shopping around.
A lender’s title insurance policy may be required, but you do have options when it comes to choosing your provider. Talk to your lender for more information and ask about your rights as a homebuyer.
RCB Bank is an Equal Housing Lender. Member FDIC.
Opinions expressed above are the personal opinions of Kenneth Wohl and meant for generic illustration purposes only. For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB.
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