If you are in the process of buying a home, the term “title insurance” is one you’re likely to hear. To help provide a general understanding of what title insurance means and how it may impact your real estate investment, we’ve compiled some of the most common questions about these types of insurance policies.

Are there different types of title insurance?

There are two general types of title insurance: lender’s title insurance and owner’s title insurance. A lender’s policy protects the mortgage lender’s interest for the remaining dollar amount should the home loan become unenforceable at any point over the repayment period. An owner’s policy protects the homeowner against financial loss up to the amount of the real estate transaction should title defects arise or another party proves to have a legitimate ownership claim to the property.

Do I have to purchase title insurance?

Most mortgage lenders require homebuyers to purchase a lender’s title insurance policy. Buying an owner’s policy is entirely optional but is highly recommended, given the risks undiscovered title defects might pose to a homeowner’s property.

How much does title insurance cost?

The cost of lender’s and owner’s title insurance policies is based on the sales price and loan amount for a new purchase and the loan amount for a home loan refinance. The cost of an owner’s title insurance premium is calculated as a percentage of the purchase price of the home and corresponds with the value of the property. The cost of a lender’s policy will vary by state and/or other factors but generally averages between $500 – $2,000.

What does title insurance protect against?

Title insurance helps remunerate a homeowner or lender for financial loss in the event certain title defects are discovered after closing and such defects allow another party to have a proven and legal ownership stake. Owner’s policies may also cover all or part of legal costs should a homeowner be required to seek legal action to defend against title defects. Some of the most common title defects include:

-Undiscovered heirs

-Forgery or fraud

-Improperly probated wills

-Recording/clerical errors

-Unpaid mortgages

-Liens

-Judgments

Are title insurance policies transferable?

Owner’s and lender’s title insurance policies will remain in effect until you or your heirs sell the property or transfer ownership to another party. During a refinance, the lender will typically require the purchase of a new lender’s policy, but a re-issue rate will be established. An original owner’s insurance policy will still be in effect following the refinancing of a mortgage.

How can I purchase title insurance?

Payment for title insurance is provided as a one-time premium at the time of the real estate sale and is included in overall closing costs. 

Have other questions about title insurance policies? The Linear Title & Escrow team is ready to assist. Please contact us today for more information.