If you’re buying or transferring real estate, the title to that property has to be free and clear with no judgements, liens, unknown owners or heirs attached to it, so nothing goes wrong. Because of that necessity, a title insurance policy is purchased.
There are two types of title insurance policies: a policy for the owner and one for a lender. The lender’s title insurance is also called a loan policy and is a requirement for the buyer to purchase if a loan is involved. The owner’s title insurance which is called an owner’s policy is optional (but highly recommended).
Lender’s Title Insurance Protection
Why is lender’s title insurance required? This policy protects the company that is issuing your mortgage any time that you buy or refinance a home. Having this policy in place means that the lender has a claim on the property, and that claim is above any other liens that could occur, such as personal debt.
Lender’s title insurance eliminates the risks and prevents any losses which could occur due to any defects in the title - defects which occurred prior to your purchase. It’s required to have lender’s insurance on the sale of any property or home whenever a mortgage is involved. In short, lender’s title insurance protects a lender’s investment in the property, in case any title defects exist that remain uncovered during the title search’s thorough process.
A rigorous title search examining property records is always performed first, before a lender’s title insurance policy is even issued, to make sure no issues exist that could impact the title transfer from seller to buyer. This includes issues like liens, unpaid taxes, or heirs who have a claim to the property. If there are any problems like these uncovered, they can usually be cleared up before the purchase.
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Large mortgage investors usually require that a lender’s title policy coverage be issued at a minimum of as much as the principal on a mortgage. As buyers pay down that principal, the lender’s coverage is also lowered.
Lender’s title insurance covers the lending institution throughout the full life of the loan. If a buyer opts for an owner’s title insurance policy as well, which is solely to protect the owner, not the lender, then both are issued as a one-time premium at the time of property purchase.
Lender’s Title Insurance Costs
Title insurance is a single fee, which is paid upfront. There are no ongoing monthly payments made. As noted, a lender’s policy is based on the amount of the loan and the purchase of a loan policy will be required by any banking institution to protect their interest.
The total amount of a title insurance policy is around 1% of the purchase price when both a lender's and owner's policy are purchased at the same time, making it a good value to have both types of coverage, considering home values.
Title Insurance at Conestoga Title
At Conestoga Title, we help make your purchase of commercial and residential properties a safe and smooth experience. Our goal is to always make buying or refinancing a property as easy and simple as possible. Our team of professional underwriting attorneys, agency and marketing representatives provide independent agents with high quality, skilled support and personal attention.
If you have any questions about title insurance or any aspect of the process, we’re ready for your call.
We’re skilled and experienced professionals in title insurance and title search. To learn more, contact us at Conestoga Title, today!