When purchasing a house, you’d probably need to decide if you’re going to purchase title insurance or not. This kind of insurance policy is different from private mortgage insurance and homeowners insurance. Below you’ll find what title insurance is, how it works, and whether you should have one or not.
What exactly is title insurance?
Title insurance safeguards you from any financial loss associated with owning your property, explains a mortgage lender from City Creek Mortgage in Sandy. During closing, you’ll see two insurance policies–one is the policy of the lender that’s required, and the other is an owner’s policy that’s optional. Both policies are upfront, one-time costs and won’t be added to your monthly payments.
When you’re buying a house, a title research company will look into the ownership history of the property to see if it the title is clear or not. If it’s clear, this means that the seller is the legitimate owner and that it’s free of any legal claims, such as creditors or levy or lien from mortgage lenders.
But if the title is indeed clear, why then should you bother buying title insurance? Well, because there’s always the possibility that an undiscovered or undisclosed issue about the ownership of the house could crop up later on after you’ve bought it.
A defect in the title following closing could likewise translate to various legal costs, or worse, loss of money and your property. Also, mortgage lenders usually insist that borrowers get title insurance to safeguard their interest in your mortgage. This makes real sense since they’re basically responsible for most of the value of your home, particularly during the early stages of your loan term.
So should you get title insurance?
Aside from the costs and possibility of losing your house, whether you get title insurance or not really depends on how secure and sure you are about buying property based solely on the title details you have. Do also note that closing lawyers might have overlooked something crucial, and while you’re not at fault or know of any of this, you’ll be the one to shoulder all the consequences. For plenty of homebuyers, purchasing title insurance is a safety net, one that could save your home in the future.