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- What Are Netting Escrows & How Does It Work?: The Best Guide - January 2, 2024
- The Secret About Prescriptive Easement: Top Guide 1 Must Know - December 4, 2023
- About Home Equity Loans In Texas And How Can One Obtain It - November 27, 2023
About Title Insurance
When you are buying a new home, you would come across the term called Title insurance with a cost associated with it.
But we cannot talk about types of title insurance without first talking about Title.
The term Title refers to a person or entity’s ownership of property. Title insurance is basically as the name implies, insurance for the property’s title.
The title insurance will cover any forgery in the deed or any lien on the property that you were not disclosed about at the time of property purchase. In this post, we will understand what are the types of title insurance.
What Are The Types of Title Insurance?
You have two types of title insurance, an owner’s policy which protects the owner, and a lender’s policy if you are getting a mortgage, which protects the lender or the bank that is lending the money to you so that you can purchase that property.
Since we know that there are two types of title insurance policies, let us know the difference between them.
I - Owners Title Insurance Policy:
The owner’s title insurance policy is coverage to the owner of the property. For example, you are purchasing a home and you are getting title insurance that insures their ownership of the property.
But what does that mean? So the title insurance makes sure that there are no other encumbrances or liens that can possibly hinder your ownership of the property.
And also make sure that there are no other claims to ownership of the property like heirs, divorces, or any other person that could claim ownership on the property above you.
A common misconception about Title insurance is that people think that it covers the house.
That is actually not true. It covers the land. A house can be built any time on a piece of land that could be brand new.
However, the land on which the property is built on been there for hundreds of years.
If there is any claim coming up to your ownership, the Owners Title Insurance Policy will help you to cover it for you.
II - Lenders Title Insurance Policy:
When you are getting a mortgage your lender or the bank will require assurance that there are no liens, judgments, or mortgages that take precedence over their mortgage.
So the lenders’ title insurance policy will cover the lender in the event there are any such claims pop up post the closing.
The interesting thing about the lenders’ title insurance policy is that a lot of owners think that they have the coverage too because their lender has that policy.
That is not true at all. That policy does not cover the owner it only covers the bank.
Conclusion
Out of these two types of title insurance policies, the owner’s policy is something that you only need to pay once at the time of purchase closing.
Whereas the lender title policy needs to be paid every time you refinance your property so that the new lender is protected with a lender’s title insurance policy.
Your home is possibly one of the largest investments you will ever make in your life. As a buyer, you will want to protect your investment as well.
This is why these two types of title insurance policies are included in your closing process.
The two sorts of title protection arrangements can not just compensate substantial claims and legitimate fees to guard against hidden titles issues but also help to diminish ownership risks by giving a careful title search before either policy is given.
There are multiple custom options regarding the title insurance purchase. In some areas, it is standard for the seller to purchase the owner’s policy for the buyer.
Whereas, in other areas, the owner’s policy is recommended buyer purchase. Your real estate agent, escrow officer, or settlement officer would be in a position to help you understand these two types of title insurance policies in more detail.
