What is Title Insurance?

Title Insurance is protection against Loss arising from problems connected to the title to your property. Homes will have several ownership changes and the land which it is built on could have gone through many more. There may be a problem at a point in that chain of title that could end up causing you a lot of trouble. An example would be, someone at one point forged a signature to transfer title (ownership). Another problem could be unpaid real estate taxes or other liens against the property. Where Title Insurance helps you is that it covers the insured party for any claims and legal fees that arise from the problems mentioned above.

Is Purchasing Title Insurance Mandatory?

If you are taking out a mortgage to purchase the property all lenders will require such protection for an amount equal to the loan amount. The insurance will last until the loan is repaid. Similar to mortgage insurance, it protects the lender but you pay the premium, which is a single payment made at the closing of your loan.

What does Title Insurance do for me?

Title Insurance protects the lender up to the amount of the loan amount given to the borrower but it does not protect the borrower against the loss of equity in the property. If you are looking for that you would need an owner’s title policy for the full value of the home. In a lot of areas, sellers pay for owners policies as part of their obligation to deliver clear title to the home buyer. In other places, borrowers must buy it as an add-on to the lender policy. It is advisable to do this because the additional cost above the cost of the lender policy is fairly inexpensive.

Does a Borrower Have the Right to Purchase Title Insurance on their Own?

The short answer to this is YES, but very few actually do. Generally, most leave it up to one of the professionals that they are working with. These professionals include real estate agents, lenders, or attorneys.

Are Title Insurance Premiums Tax Deductible?

Under existing rules, they are not. If the tax code was logically consistent, however, premiums paid by borrowers on lender policies—those that protect only the lender—would be deductible.

Why is a new Policy needed when I refinance?

You do not need a new owner’s policy but the lender will require you to purchase a new lender policy. Even going through the same Lender from when you purchased your home, the existing lenders policy terminates when you pay off the mortgage. The lender has concerns about title issues that may have arisen since you purchased the property. If a new lien is now against the property the lender will want to do a new search to uncover this lien. This lien will be required to be either paid off or a subordination agreement with the new lien holder will have to be issued.

For how long is the Property Owner Purchasing Title Insurance Covered?

Forever. The owner’s protection last as long as the owner or any heirs have an interest in or any obligation with regard to the property. When a homeowner sells, however, the lender will require the purchaser to obtain a new policy. That protects the lender against any liens or other claims against the property that may have arisen since the date of the previous policy.

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