Mortgage Monday

Title insurance is a certain type of insurance for a homeowner. You get it when you buy a home and when you take out a mortgage. It protects the homeowner as well as the mortgage lender if any issues arise after the home is purchased or after the money is disbursed. Think of it as more risk prevention rather than risk assumption.

The cost of the title policy covers research of the property title and marketability of same, protection against any future claims and the cost of legal fees in case an issue does arise. The premium is paid only once, at the time of the purchase or a refinance closing. In the case of a refinance there is a discount for a repeat purchase, but you do not have to go back to the same title company.

Title insurance protects the homeowner from:

• Any issues that arise after the closing that might prohibit the use or ownership of the property (think of the movie Poltergeist)
• From any person or entity that comes out of the past and claims to have a right of ownership or use of the property (think  of a long lost child of the seller that comes forward as an heir)
• A claim from a lien holder of the seller that proves they did not get paid off (think of an unrecorded third mortgage)

Title insurance protects a lender when there is a mortgage involved.

• The title company does the research to make sure the title is free and clear of any encumbrances and is fully marketable (think open taxes or a fraudulently recorded deed)
• The policy give the lender the right to pursue a claim in the case of error
• The title company performs certain duties on behalf of the lender such as paying taxes, filing deeds and satisfying mortgages

Yes, everybody hates to pay for insurance until they really need it. With title insurance as opposed to homeowner’s insurance, if you file a claim they can’t drop you.