What Do You Need To Know About Title Insurance?
There are two types of title insurance: Lenders Title Insurance and Owners Title Insurance.
Lender’s Title Insurance
Lenders require title insurance when they issue you a loan. The lender’s title insurance is usually based on the dollar amount of your loan. It protects the lender’s interest in the property should a problem with the title arise. The policy amount decreases each year and eventually disappears when the loan is paid off. Since you are the borrower, you will pay the title insurance premium.
Owners Title Insurance
Owner’s Title Insurance is usually issued in the amount of the real estate purchase. You purchase it for a one-time fee at closing and it lasts as long as you or your heirs have an interest in the property. Only Owner’s Title Insurance fully protects you should a problem arise with the title that was not uncovered during the title search. Owner’s Title Insurance also pays for any legal fees involved in defending a claim to your title. Owner’s Title Insurance is necessary to fully protect you. Lender’s Title Insurance serves as a protection only for the lending institution.
How Are You Protected?
In order to issue title insurance, the title company must search public land records for matters affecting that title. Some examples of items that can cause a problem are: deeds, wills and trusts that contain improper information; outstanding judgments or tax liens against the property; and easements. Title companies fix the problems and then issue the title insurance.
Sometimes hidden hazards can emerge after closing. Things such as mistakes in the public record, previously undisclosed heirs claiming to own the property; or forged deeds could cloud the title. Owner’s Title Insurance offers financial protection against these by negotiating with third-parties, and paying claims and the legal fees involved in defending the title.
If You Are Buying a Newly Built Home, Do You Need Title Insurance?
Construction of a new home raises special title problems for the lender and owner. A title search will uncover any existing liens and a survey will determine the boundaries of the property being purchased. In addition, sometimes builders fail to pay subcontractors and suppliers. This could result in the subcontractor or supplier placing a lien on your property. Purchasing Owner’s Title Insurance will protect you against these potential problems and pay for any legal fees involved in defending a claim.