What is Title Insurance
Lenders require everyone to purchase title insurance as part of the cost of your home loan. But loan title policies protects the lender, not you. For self-protection in the event of any unforeseen title issues, which could postpone closing indefinitely, buyers must purchase separate owner’s title insurance. Is it necessary and really worth the cost? is the question every buyer must answer for themselves. Here are some considerations:
Closing and Title
Before closing, the closing attorney runs a routine check on title to reveal any liens or title defects against the property. Should this check reveal any liens, these must be cleared before the parties can close. Mechanic’s liens are common, where a contractor performed maintenance or repairs on the home and wasn’t paid (or paid satisfactorily in his estimation) so he filed a lien against the property. You will need to pay the contractor or work out a resolution to remove the lien.
Hidden Title Defects
But liens of this sort are the “easy” or more common ones. What about hidden title defects or liens that don’t show up on a quick title search? What if a long lost relative or heir comes out of the woodwork claiming to have ownership rights to the property? Or what if was discovered an incorrect legal description existed on the property, making the contract, deed, and/or other documents void. In cases like this, title insurance would protect you from financial loss and defend you against claims.
Should I Pay for Title Insurance?
You are very wise to purchase a buyer’s title insurance policy to protect your interests. It’s a one-time fee paid at closing that should you need it because of any revealed title issues, will be worth the cost by leaps and bounds. Title insurance rates are typically between $500 and $1000, depending on loan amount. Like car or health insurance, it may not be needed, but if it is, it will be money well-invested. And the policy lasts as long as you and your heirs own the property.
Enhanced Title Insurance Policies
Ask about enhanced coverage policies too. For a few more dollars, aggravations like inaccurate surveys (which are nightmares in potential boundary disputes with your neighbors), building permit violations, some unforeseen violation of the restrictive covenants in the subdivision or city zoning laws are covered and problems that could derail closing for weeks, months, or years are avoided.
