Do You Need to Purchase Title Insurance?

What is Title Insurance?

When you purchase a home, it’s wise to purchase title insurance too. The ensures the home’s title is researched to make sure the seller has the right to sell the house; for example, that no one else has a claim on the house.

The title examiner will look closely at all available public records of the house, including past deeds, wills, and trusts, to make sure the house is free and clear to sell.

Ultimately, if the title is clear, you can buy the house. If not, any legal problems need to be cleared up.

 

Protection for You and Your Lender

Title insurance protects you and your mortgage lender if a problem occurs with the title, at any point during your ownership. It can be a problem that didn’t show up in the title examination, something the examiner missed, or an error in the public records. Let’s say a long-lost heir claims a right to the house after you’ve bought it. Title insurance will cover the cost of untangling the legal problem.

 

Two Types of Title Insurance

• A lender policy, usually issued for the mortgage amount, covers the mortgage lender. If you must go to court with the long-lost heir, the policy will cover the costs. If the long-lost heir is indeed the legal owner of the house, the policy will pay the mortgage back to the lender.

• An owner policy covers the price of the house and pays the owner for losses incurred due to title issues. If, for example, the long-lost heir wins the court case, your owner policy will reimburse you for the loss of the property.

Typically, the buyer pays for title insurance. It’s usually a one-time fee; part of the closing costs. To clarify, it is different from Homeowner’s Insurance, which is typically paid in a monthly premium.

 

What’s Not Covered?

Title insurance doesn’t cover any defects found in the property after closing, and some policies won’t cover problems related to easements, mineral rights, and liens.

 

Do You Need It?

Most lenders require you to purchase a lender policy, but not all require an owner policy. Of course, if you’re paying cash for a property, title insurance is optional. On the other hand, it’s always a good idea to protect your investment.

This article was provided by www.worldreferrals.com