Purchasing a home can already be a stressful and confusing process especially when it comes to understanding all the different closing costs associated with it. When you buy a home or you refinance your mortgage you will be required to buy title insurance before the closing on the new mortgage. The title insurance is there to protect the mortgage lenders from any third party claims on the property, in other words it protects them from any losses that could happen if there is a dispute on the title. There are two different types of this insurance that you need to know about.
The first type of title insurance is the one that the mortgage lenders requires you to get to protect them from financial losses should there be an unexpected problem related to the title of the property. This type of insurance will not protect you, the homeowner. This is what the second type is for because it will protect you instead of the lender.
The insurance for you is not required but it is a very good idea to have it and is usually a standard offering with any good real estate lawyer. It can save you hundreds, even thousands of dollars if the title is disputed after you bought the home. It will also save you in lawyers fees as your lawyer will not need to do any extra lengthy and comprehensive title searches. In most cases the cost of the title insurance would be less expensive then having your lawyer doing and exhaustive search. The title insurance for the lender will expire after the mortgage has been repaid. The homeowner title insurance will last for as long as you own your new home.
When you first apply for refinancing or to buy your home the lender will have a title search done to make sure that you are the owner and that it is not listed as a third party. You will be charged a fee for this search. The reason they do this is to find out if there are any liens that have been placed on the property such as property taxes.
This is why you want the title insurance for you and not just the lender. You have to protect yourself in case there are any unforeseen problems in the future. If you don't have this insurance and the attorney overlooked something when they did the title search, you could be held accountable if an existing lien shows up later. For example, if a lien is found later and you don't have this insurance then you could be held responsible for any work done on the property before you bought the home.
So, with title insurance you will have to get the lender covered but you also want to protect yourself and get the same type of insurance. That way if something does happen in the future you will not be held responsible. Having this type of insurance is a good idea for every homeowner to have. So, make sure you get the insurance you need now.
