Title insurance is important to property owners. In fact, most lenders will require the buyer to get a title insurance policy on the property to protect the lender as a condition of the mortgage loan on it. How long the title insurance lasts will depend on the type of title insurance policy you buy.
Why Title Insurance Is Important
If you are buying real property, such as your home, you probably had to select a title company to handle the closing. Before you close on the sale, your title company will perform a title search on the property you are purchasing. The purpose of this title search is to verify that your seller is the legal owner of the home and whether other claims against it exist that must be resolved before the sale can close.
In most cases, the seller is the rightful owner of the property. However, situations can arise when other parties may assert a claim to the property. Sometimes the seller does not really have legal right to sell the property without satisfying the interests of third parties (such as lienholders) at the time of the sale.
In rare cases, the seller had no legal right to sell the property at all. If you buy a house from a seller who did not have full rights to the property, you will have expensive legal problems later on. Title insurance protects you against those risks.
You can buy title insurance once the title search is completed and any identifiable competing claims are resolved. Title insurance is insurance that protects, or insures, the title of your property against claims of ownership to the same property that may arise after the title search is completed. The title company assumes responsibility for resolving title issues you could face after you take ownership of the property.
Types of Title Insurance and the Length of Their Terms
Two types of title insurance policies are available. Which type you need depends on your interest in the property, as described below.
A lender policy, also called loan title insurance, is what your lender requires as a condition to giving you a mortgage loan. The lender’s policy is title insurance that protects the lender’s mortgage interests in the property.
The lender policy covers the risks that could arise if there is ever a problem with your ownership interests in the property. This title insurance will provide a solution to any title issues that affect your lender. In that way, your lender can be assured that it will be able to collect the mortgage loan amount even if you did not acquire clear title to the property.
A lender policy lasts only for as long as the loan remains unpaid. For example, if you take a 30-year mortgage on the property and keep it until you pay off the mortgage loan, the lender policy ends when you make your last payment.
If you decide to sell the property before you pay off the mortgage loan, you will have to pay off the loan when you sell. Usually, that is done at the closing. At that time, the lender policy terminates.
If you refinance the mortgage loan, you will get a new loan to replace it. The lender policy will terminate; but you will have to replace it with a new policy to cover the new mortgage loan.
Property Owner’s Policy
The lender’s title policy described above does not protect you when you become the owner of the property. For that protection, you need to buy a separate policy, called an owner’s title insurance policy. An owner’s policy is title insurance that protects your title interests when you become the property owner. Most likely, your lender will not require you to buy an owner’s policy, and it is not mandated by state law.
Under the owner’s policy, your title company provides you with the assurance that the title is free and clear of competing claims and interests. The policy is the title company’s commitment that they will take care of any problems you may face with the title in the future. It is a good idea to buy an owner’s title policy.
This policy is your only protection from title problems that may arise when you want to sell your property or transfer it to your heirs in the future. An owner’s policy lasts for the entire time you own the property (unless you decide to terminate it before you transfer title).
That means that if you have owned the property for 30 years and decide to sell it next year, your policy will end when you close on the sale. If you die while you still own the property, your title policy transfers to your spouse or children. The title policy will remain in effect for as long as your children own the property.
Contact Mathis Title Company for More Information about Title Insurance
If you are buying real property in the Virginia area, contact the title experts at Mathis Title Company. They are a proven title company with a legal background. Their title experts handle many thousands of closings each year and are available to help you with your closing or any title issues you are facing.