It guarantees that the buyer of the property owns the asset free and clear of any claims or encumbrances. Title insurance ensures that all outstanding mortgages, liens, and other encumbrances against the property are taken care of prior to the title transfer.
A lender's title insurance policy is typically purchased for the total amount of the loan. The cost of a lender's policy is usually related to the cost of the loan, though it should not exceed 1% of the overall loan amount. A lender’s title insurance policy also provides coverage if the deed to the property is found to be fraudulent or the title is clouded by errors or omissions in the public record.
Owner’s title insurance policies are designed to protect the homeowner from financial losses due to inaccuracies in the public records, undiscovered liens, errors in the documentation, and other issues related to the title. Owner’s title insurance is purchased one time and usually covers any title problems forever, as long as the same owner holds the property. It is also important to note that unless a lender requires a borrower to purchase owner’s title insurance, it is not a requirement.
Generally, a title search will be conducted in connection with the purchase of a property to uncover any potential issues with the title. If a title problem is found, it may be resolved before the sale is complete or the seller may agree to buy title insurance to guarantee the validity of the title and make sure that all outstanding mortgages, liens, rights of way and other encumbrances are taken care of prior to the title transfer.
Title insurance plays an important role in any real estate transaction. It provides protection against unknown defects in the title that may jeopardize the ownership of a property. Title insurance provides protection to both the lender and the homeowner, which can prevent costly problems down the road.
This article explains the importance of title insurance in any real estate transaction. Title insurance is a type of indemnity insurance that protects owners and lenders from any financial losses due to inaccuracies in the public records or undiscovered liens and encumbrances on the title of a property. A lender's title insurance policy typically costs up to 1% of the loan amount and offers protection for any issues found in the title. An owner's title insurance policy provides coverage against title problems that were found in a title search but not resolved prior to the sale. It offers protection against potential problems that may arise down the road. Title insurance is a valuable form of protection for owners and lenders and can prevent costly problems in the future.
This article was contributed on Nov 12, 2023
