Lender's Title Insurance Helps Protect Lenders from Mayhem
The two major kinds of title insurance are lender's and owner's policies. As you might expect, a lender's policy protects a lender from title and land ownership issues, while a owner's policy protects the owner.
Lender's Vs. Owner's Title Insurance
If you're a lender, the last thing you want is a title issue preventing one of your borrowers from making their monthly payments. That's why most lenders require that property buyers purchase a lender's title insurance policy from a title agency before they'll agree to close any major property transaction. However, in some areas, it's actually the custom for the seller to pay for lender's title insurance (though this is somewhat rare.)
Costs of lender's title insurance
While owner's insurance premiums are usually based upon the sale price of the property, lender's title insurance premiums are based upon the amount of the loan, which is often 80-90% of the sale price of the property itself. Therefore, buyers usually end up paying less for lender's policies than they do for owner's policies.
Why You Still Need Owner's Title Insurance
In comparison to an owner's title policy, lender's title insurance only protects the lender's financial interest in a mortgage-- it doesn't protect a property owner's home equity or help pay for their legal bills should a title problem arise. So, if your a property owner, you'll still need to get an owner's policy if you want to stay protected.
To Save, Always Check for Title Insurance Reissue Credits
If you're purchasing property that's recently been insured with a title policy, you may qualify for a reissue credit, which could give you a serious discount. The time limitation for reissue credits varies from state to state; for example, in Florida, a property which has been insured in the last three years is eligible for a reissue credit, but in New York and other states, properties that have been insured in the last 10 years may still be eligible. Reissue credits typically apply equally to lender's and owner's title insurance policies.
Lender's Title Insurance and Refinancing
Unlike owner's title insurance, which lasts as long as the current property owner owns their property, lender's title insurance expires when the policyholder pays off their mortgage. So, when a property owner refinances their property, since the old loan is technically paid off by the new one, they'll have to get a new lender's policy. However, in many cases, they can still apply for reissue credits, which may be able to seriously cut their closing costs.
So, whether you're a property buyer, a lender, or a real estate agent who wants to check out the process, it pays to consult with the experts at Florida Title Company to learn how to save money, and protect you (or your clients') rights to their property.