Title Insurance Tidbits
The
purpose of title insurance is to protect you if there’s a problem with your
title. Those problems can turn into expensive nightmares in the small chance
that you encounter them. Examples include ownership disputes on your property,
title fraud, un-discharged liens, encroachments, zoning issues, survey
problems, property tax arrears and so on.
Real
estate lawyer Bob Aaron wrote a recent overview of title insurance here. He says, “Most real estate lawyers today regard title
insurance as a critical component…and will usually not close a purchase without
it.”
And
no, lawyers don’t get big kickbacks for pushing title insurance. Aarons says
lawyers "are not permitted to get referral fees/commissions" on title
insurance. Lawyers recommend it because it protects the homeowner, limits the
lawyer’s liability and makes closing more efficient.
*******
There
are two broad types of title insurance:
- Homeowner policies, which:
- Cover the homeowner
- Last as long as you own
the property
- Are priced based on the
property value
- Lender policies, which:
- Protect the lender’s
interest in your mortgage
- Last as long as you
have your mortgage
- Are priced based on the
mortgage size
The
cost of title insurance varies widely depending on the location, type and value
of the transaction. It starts at roughly $150-$350, but can climb from there.
Once
you pay for title insurance, you can often avoid paying for it again. Here are
some cases where that’s true:
- You purchase a homeowner
policy and stay in your home
(Homeowner policies generally cover your property for as long as you own it.) - You pick a lender that
doesn't require a lender title policy
(Many do, but some don't.) - You refinance and choose
a lender that pays for its own mortgage-only title policy
(A broker can tell you which lenders do this. Keep in mind, a lender-only policy doesn't protect you.) - You switch lenders and
your existing policy is "ported” to the new lender
(If it can't be ported, many lenders will pay the new title insurance premium for you on a straightforward switch.)
The
stipulations are that, "The original mortgage security must remain
unchanged and no additional funds can be advanced, unless provided for under
the original mortgage terms and conditions. The date of policy is the date of
registration of the original mortgage, so the new lender assumes the coverage
under the policy of the original lender at the date of that mortgage
registration."
Two
related notes:
- The loan-to-value cannot
increase if a title policy is being transferred to a new lender.
- Lenders don’t usually
accept assignments of collateral charges, so for practical purposes a
title policy on a collateral charge mortgage isn’t generally
transferrable.
But
lenders don’t always accept a mortgage that a prior lender has registered.
That’s because, as Haslett puts it, “The new lender is stuck with whatever the
language is in the existing lender’s mortgage documents.”
And
here’s an interesting side note:
Haslett
says, “New lenders often don’t request assignments from an existing lender
because (doing so) provides that lender an opportunity to…retain the borrower.”
If the old mortgage is discharged and a new mortgage is registered, however,
“The existing lender often doesn’t know about the borrower moving until it’s
too late.”
In
addition, when clients change lenders using a refinance instead of an
assignment, the party requesting the discharge statement (from the existing
lender) doesn't need to disclose the new lender's name. As a result, the
existing lender cannot see who they are competing against.
Haslett
adds that, “If a lender wants the old mortgage discharged and a new mortgage
registered, it will attract a new title insurance policy in the name of the new
lender and result in a title insurance premium
Most of the lenders I, (Amy Wilson) work with require the title insurance as part of your mortgage approval and I will go over it with you in your budget for legal fees.
Call Amy Wilson for your mortgage today! 780-919-0475
No comments:
Post a Comment