As you get into the process of buying a home, you will quickly see that there are many moving parts. Included in these you may have noticed a title insurance policy which is likely also a line item included in your closing costs. You may wonder what this type of coverage does and whether a lender’s policy is different from an owner’s policy. The bottom line is that an owner’s policy provides you, the homeowner, with the protections that title insurance offers while the lender’s policy provides those benefits only to the lender. Here is what you need to know about what an owner’s title insurance coverage can do for you.
A Lender’s Title Insurance Policy vs. An Owner’s Policy
When you buy a new home with a mortgage, there is always a small chance that someone else could come forward with a legitimate legal claim to your property. Should this happen, both you and your lender may potentially lose a significant amount of money. For this reason, you will likely need to pay for both a lender’s title insurance policy and an owner’s title insurance policy.
A lender’s policy protects the institution providing your mortgage, and an owner’s policy protects you. If your claim to your property is overridden, your lender loses all of the money you didn’t pay back in your mortgage. To ensure that they don’t lose this investment, lenders generally require you to have a lender’s policy ensuring the insurance company will pay them back the deficit. Most lenders include the cost of this policy among the fees that you pay to close on your home.
Since the required lender’s policy does not cover you, you will need your own owner’s title coverage. An owner’s policy protects your investment and any unexpected payments that may come up as a result of the legal trouble.
Why You Should Buy Title Insurance
Title insurance may seem like just another unexpected cost of buying a house—and it is optional most of the time—but it is an important investment that can protect you from significant financial losses. Title insurance is a safeguard against possible hidden issues with your deed or legal claim to your property. Even if you conducted a title search before buying your home, these conflicting claims may still be lurking.
While these problems are uncommon, they are not necessarily rare, and the effects can be devastating. Not only will you risk losing all of the money you have put into down payments and mortgages, but you will also be responsible for any legal representation to defend your investment.
Title insurance is not just for properties that are a new purchase. A claim could be unearthed at any time, and the longer it takes for that situation to be discovered, the more money you will have put into your mortgage and the more you stand to lose. Title insurance purchased during closing protects you the entire time you own the home.
What Title Insurance Can Protect You From
There are many legal issues that can affect your claim on some or all of your property. Title insurance can give you back the money you lost through your mortgage, property or home value. Common event coverages include:
- A deed that has not been filed correctly. Mistakes such as an incorrect name can bring your claim into question.
- Information on a deed that is fabricated or false. Forged signatures and incorrect facts about the property can make it unclear who the past or current owners should be, the true extent of the property and the value of the property.
- Mortgage fraud. If a previous owner falsely claimed their mortgage was paid, the result could be foreclosure.
- Liens. These are debts that are attached to the property. They could include fines from homeowners’ associations, not paying for work done to the residence, unpaid property taxes and more.
- Encroachments. A neighbor may have built something that extends into your property. You can also be protected from the consequences of a previous owner had built something that extends into a neighbor’s property.
- Easements. A third party may have the right to use some of your property. This could mean a utility company can install something in that area, or it could be dug up to replace some drains. Insurance can reimburse the loss of property value this creates.
Trust the Experts For The Right Owner’s Title Insurance Coverage
If you are ready to select a title insurance policy to protect your new investment, be sure to rely on experts who understand how to keep your home safe. The professionals at Mathis Title Company will gladly answer any questions you may have and provide personalized guidance. Contact our team to schedule an appointment or learn more.