Why Title Insurance Is More Than Just Another Good Idea
by:
Calum MacKenzie
Tucked in among all your other closing costs when you buy a
house you’ll probably find a charge for “title insurance”.
If you’re taking out a mortgage to buy a house, your lender
will insist that you take out title insurance. This is more
than just one more nuisance charge levied by people who are
determined to make a few extra bucks on your home purchase.
Title insurance offers you some real, tangible security in
the event that there’s ever a problem with the title to your
home.
But I thought that’s what the title search was for…
When you agree to buy a house, you want to be sure that the
person selling it to you actually has the legal right sell
it. The information about who has rights of ownership to a
piece of property may be scattered in all sorts of different
places. The way that you find out who can buy and sell the
property is to hire an experienced researcher who
understands all the things that can affect the transfer of a
title from one owner to the next.
Because the information is so scattered, though, there is
always the chance that some little bit of information might
not be recorded or found.
Really, though, what could go wrong with a title?
Let’s just say, you’d be amazed. We’ve heard stories that
range from the bigamist’s first wife having a claim on the
house to the fast-talking con artist who forged ID papers
and sold a family’s home while they were on vacation. Most
title disputes have far more boring causes – an old
homeowner’s loan that wasn’t paid off, a clerk’s mistake in
filing a document or a dispute arising from a mismarked
property line.
So what does title insurance cover?
When you take out title insurance, the insuring company will
do a full search of the title records to be sure that they
are free and clear, but there’s always the possibility that
they missed something. If they did, they promise to pay any
costs arising from the title challenge and to reimburse you
for any losses you incur because of it. In other words, if
someone does show up with a claim against your deed, the
insurance company will pay the legal costs of defending
against the claim. If you lose, they will pay off the cost
of the house.
Okay, so what’s with the “lenders insurance” and “buyers
insurance”?
There are two kinds of title insurance. Mortgage lenders
require only that you buy “lenders insurance” because
they’re looking out for THEIR interests, not yours. In the
event that a successful claim is made against your ownership
of your house, lenders insurance will pay them any money
outstanding on your mortgage. You, however, are out any
money that you’ve already paid on the house, including your
down payments.
Owners insurance covers the entire purchase price of the
house. If there is a claim against the property, the
insurance company will reimburse you any money that you’ve
already paid toward your mortgage and pay off the remainder
of the mortgage so that you’re not liable for continuing to
make the payments on a house that you don’t own.
How do I pay for title insurance?
You’ll pay for title insurance as part of the closing costs
of your house. It’s a one time premium that will cover you
for as long as you own your home, as long as the claim
arises from something that happened before the title search
was done. There are no monthly payments – pay once, and you
don’t have to worry about it again.
It’s worth it, wouldn’t you say?
About the Author:
Calum MacKenzie is a professional
Tampa, Florida real estate agent. He lives and works
in New Tampa and has extensive knowledge of the
New Tampa real estate market.
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