Mortgage Title Insurance, Who Needs It
Tile insurance is one of those closing costs that many borrowers pay without ever understanding what it is they are paying for. Almost all lending institutions require title insurance when you take out a mortgage. The title insurance is paid at the time of the closing and is considered one of the items in the amount of your closing costs for a home loan. The insurance covers the balance of the mortgage loan and last until the loan is repaid.
Title insurance is a policy that assures what liens are attached to a property and is in the name of the title owner properly. Title insurance covers you and the lender over problems arising from liens on a property and ownership. The title company searches a property’s history. The title company will look for liens placed on the property, previous claims on the property, and any special easements or restrictions that may exist.
Title insurance comes in two forms. The first part is the mandatory insurance premium you pay to cover the mortgage lender or bank from claims arising out of conflicting liens or ownership rights to your property. The second form is an insurance premium you pay to cover you against any claims regarding conflicting liens or ownership on the property. One policy is protecting only the mortgage lender; the other policy accomplishes the same goal but insures you as the homeowner. The lenders coverage of the home loan amount is mandatory; however, borrowers can decline to pay for the coverage for themselves. The portion of the title insurance you buy to protect your equity in the property is referred to as the owners policy.
Sometimes the lack of insurance can have devastating consequences. The insurance is designed to cover losses that may occur do to problems related to the title of your property. Problems stemming from home loans could include the real estate taxes remaining unpaid from a previous owner, a mortgage loan that is still recorded on the property from a previous transaction or improper transfer of ownership of the property. The policy will not only cover actual financial losses but will assume responsibility for legal defense for defects covered under the terms of the policy. The coverage is for events or errors that occurred before the date of the policy and not for future events.