The details of all of the fees and costs that you need to pay often blur together whether you are buying your first home or your tenth. But when it comes to refinancing, you may have the impression that things will be altogether easier; after all, you do not have to worry about many closing documents, only those pertinent to your home loan itself.
However, you may be taken by surprise at how title insurance mixes with the rest of the fees and procedures that you will go through in order to refinance your home. In order to make the right decision for you and plan accurately for your financial future, be sure to understand whether you will need to include title insurance as one of the costs of your refinance.
Understanding The Requirement For Lender’s Insurance
When the term “title insurance” comes up, you may only be thinking of the policy that belongs to you, the homeowner. However, in the context of a home purchase or refinance, there are actually multiple title insurance policies at play. The only one that is truly “required” is the title insurance that your lender holds—and which you, the buyer, typically pay for on their behalf.
This policy does not protect you; it simply protects the lender from unforeseen issues with the title of the property that they are using as collateral for your loan. If an issue arises with the home after you have closed and been deemed the new owner, a lender’s title insurance policy will shield them for as long as you owe a mortgage and are involved with that lender.
Acquiring Your Own Title Insurance Policy
In contrast, it is also possible (and often recommended) to purchase your own title insurance policy separate from the lender’s policy so that you as the buyer are also protected. This type of insurance typically comes as a single fee that is paid one time, rather than in monthly installments like most other types of insurance. That makes it much more affordable as well, and it will protect you and your heirs for as long as you own the property.
You can rest assured that if you own title insurance, any issues that arise with the property’s history will not impact you like they would have if you were uninsured. Some of the most common problems that can occur are discovering after your purchase that there is still property tax or other liens owed on your home, which you then become responsible for.
Do You Have To Pay Again When You Refinance?
The short answer to the question of whether you must pay for title insurance again whenever you refinance is both yes and no. The title insurance policy that you bought for yourself in order to protect you, the buyer, as owner of the home is tied to you and the property; that means that for as long as you own the property (or your heirs do), that title insurance policy will protect you from problems such as undiscovered liens. When you refinance, the ownership of the property has not changed, even though the financial details have. Thus, you will not be required to re-purchase a new title insurance policy for yourself when you refinance your home.
However, if you are switching lenders in order to refinance—which is common, as moving to a new lender can secure more favorable terms than your current arrangement—you will typically be required to purchase a new title insurance policy for that lender, just as you did when you closed on the home. Like before, the lender will wrap the cost of their title insurance into the other fees that you will pay when the deal is done; refinancing comes with many of the same closing costs as the original purchase of the home did.
So the good news is that closing on your refinanced mortgage will not usually be as expensive as it was the first time, since you get to keep your title insurance that you purchased the first time. Just be aware that title insurance will still factor into the equation when you refinance.
Trust The Title Experts To Help You Navigate The Process
Whether you are exploring your title insurance options for the first time or you are refinancing and are wondering how that will affect your current title insurance plan, you can always ask the experts. The professionals at Mathis Title Company would be happy to answer any questions that you may have and guide you in finding the right policy for you. Reach out today at 703-214-6620 or online to schedule a consultation.