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Do You Need Title Insurance to Refinance Your Mortgage?

couple signing papers to refinance their mortgage with a title agent

You've decided to refinance your home loan due to lower interest rates, a move that could potentially save you a significant amount of money over the loan's duration. However, along with the benefits of a lower rate, it's important to understand that typical closing costs associated with any new loan will apply, including service fees, and title insurance protection, among other expenses.

It is likely that you will need  to purchase a new Loan policy for a refinanced loan amount in order to protect the lender. To a lender, a refinance loan is no different from any other home loan, and it seeks to protect the new loan with title insurance, just as the original lender did. This ensures that the lender's interests are safeguarded in case of any title-related issues.

Lenders commonly sell loans to secondary market investors like FannieMae, which requires title insurance coverage to protect its security interest in the loan. Even lenders retaining original loans in their portfolio find it prudent to obtain a lender's policy to safeguard their investment against potential title defects.

If a loan policy is purchased at the time you purchase your home, it is  important to note that this policy remains effective only for the duration of the insured loan. With a refinance, the old loan is paid off, and a new one takes its place, requiring a new title policy in order to protect the new lender's interests You see why title insurance remains critical for refinancing transactions.

Refinancing with Title Insurance

The title insurance policy you acquired to protect yourself as the homeowner remains tied to you and the property for as long as you own it or until it passes to your heirs. This policy safeguards you against issues like undiscovered liens. When you decide to refinance, the property's ownership remains unchanged, even though the financial details may differ. Consequently, you won't need to purchase a new title insurance policy for yourself during the refinancing process.

However, you may switch lenders for the refinance, a common practice to secure more favorable terms. In that case, you will typically need to acquire a new title insurance policy for that specific lender, which mirrors the initial home purchase process where you obtained title insurance. Like before, the lender will incorporate the cost of their title insurance into your overall fees when finalizing the deal. Refinancing involves many of the exact closing costs as the original home purchase.

Closing your refinanced mortgage is generally less expensive than the first time, as you can retain the owner’s title insurance purchased during the initial transaction. Remember that title insurance remains a factor in the equation during refinancing.

The Long and Short

Everyone is usually required to get title insurance during any level of finance, first-time or re-fi. Neglecting to do so can lead to lengthy court battles, expensive attorney fees, and extra heartache and heartburn for homeowners. When refinancing a home, so long as you work with the same lender you did the first time, ignore the title insurance because you own the property, and protection extends for the entire time you own it. If a new lender gets involved, repurchase it.

With a legacy of over five decades, Conestoga Title Insurance Co. has solidified its position as a venerable authority in title insurance. Conestoga Title is a trusted and esteemed entity renowned for its unwavering commitment to delivering dependable title insurance services to the real estate, legal, and financial sectors. The foundation of its success lies in its devoted cultivation of robust relationships, achieved through exceptional service, profound expertise, and a steadfast commitment to financial security.

Explore our information page for answers to frequently asked questions, or contact us at 800-732-3555 for comprehensive details on securing the right title insurance for your needs.

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