If you're in the process of buying a property, you may be familiar with the term title insurance. Title insurance is a crucial part of any real estate transaction that helps protect against unexpected claims or liens on a property's title. However, did you know that there are two types of title insurance policies? Let's take a closer look at lender's policy and owner's policy.
When you mortgage a home, your lender may require you to purchase a lender's policy of title insurance. This policy protects the lender's security interest in the property, and it remains valid for as long as the lender maintains an interest in the property (usually until the mortgage is paid off). In other words, if there's an issue with the title, the lender's policy will cover any losses that the lender may incur.
While the lender's policy protects the lender's interest in the property, an owner's policy of title insurance protects your rights as the homeowner. This policy generally remains valid for as long as you or your heirs have an interest in the property. If there's an issue with the title, the owner's policy will cover any losses that you may incur as a result of that issue.
Both the lender's and owner's policies of title insurance provide coverage for valid claims and legal fees to defend against hidden title issues. Additionally, they both help decrease ownership risks by providing a thorough title search before the issuance of the policy.
The purchase of title insurance policies can vary by location. In some areas, it's customary for the seller to purchase the owner's policy for the buyer, while in other areas, the buyer purchases the policy.
If you're refinancing your mortgage, you'll need to purchase a new lender's policy of title insurance. This is because the life of one loan ends, and a new one begins, so a new policy is needed. However, because the owner's policy of title insurance remains valid for as long as you or your heirs hold an interest in the property, there's no need to purchase a new owner's policy when refinancing.
In conclusion, title insurance is an essential part of any real estate transaction. Understanding the different types of title insurance policies, their benefits, and customs can help you make informed decisions during the home buying or refinancing process. If you have any questions or concerns, don't hesitate to reach out to a reputable title services company for guidance.