Title insurance is an all-important form of insurance for homeowners and homebuyers. But, most people are shocked to find that refinancing their mortgage means purchasing another policy. Here is why it is necessary to buy title insurance for refinance loans.
The Importance of Title Insurance for Refinance Loan
When you first purchase a home, you will find that there are many closing costs associated with the sale. One of these costs is title insurance.
Before you buy a house, a title company will typically perform a title search. This will help uncover any issues that ples of such issues include missing heirs, undisclosed liens, and mistakes in paperwork. Title companies will then work to resolve these issues for you.
Sometimes, though, a title search will not completely uncover all title issues. This is where title insurance comes into play.
Lender’s title insurance protects the financial interests of mortgage lenders in the event of a missed title defect. It essentially ensures that they won’t lose money in case a previously unknown heir shows up and claims ownership of the property or any other title issue. Most lenders require buyers to purchase lender’s title insurance (also known as a loan policy) when taking out a loan.
Now, when you decide to refinance a loan, you might be surprised to find that your lender will ask for another title insurance policy. Your first thought you. Don’t worry, though – it’s all part of the process.
Do You Need a New Loan Policy When You Refinance a Home?
The short answer is yes. Lender’s title insurance only typically lasts for the life of the loan. As such, when you refinance (or take out a new loan), it will require a new policy.
Even if you are borrowing from the same lender for the same property, you will need to buy lender’s title insurance again. Continue reading “Do You Need Title Insurance For Refinance Loans?”