When you purchase your home, you will be given a title (deed) to your new property. A deed is a legal document that proves you own the property, and then a policy is issued stating so. Your interest in the property is now protected from title defects that may arise.
However, not all titles give you free and clear ownership of the property. That’s where title insurance will protect you and your lender from title disputes and other ownership issues.
Title Insurance and the Buyer
An owner’s title insurance policy will protect you from any title defects that may arise, unlike loan policies, which only protect the lender. The owner’s title insurance policy confirms that the buyer owns the title and that the title is free from defects.
There are certain situations where someone might put a lien on your property. New owners might see liens if the previous owner failed to pay the mortgage, if a contractor did work without the new owner’s consent, or if the previous owner owes unpaid property taxes. If these liens were not disclosed prior to the sale, a buyer could face a situation where a third party makes a claim to the property.
The title insurance policy is in effect for as long as the buyer, or their descendants, own the house. Should a homeowner have the title challenged, the policy will cover all losses up to the amount of the original purchase price of the home.
Title Insurance and the Lender
The lender knows how important it is to protect their interest in the loan, and thus requires the buyer to purchase a lender’s title insurance policy. Should the title by voided in court by a claim from a third party, the title insurance policy would repay the lender the outstanding balance on the mortgage. The policy is valid until the mortgage loan is paid off.
When a homeowner refinances, it is necessary to purchase a new title insurance loan policy, as the new loan will technically pay off the old loan.
At Title Junction, we care about helping you stay informed throughout your real estate transaction. The experts at our title company have extensive knowledge about real estate not only in Cape Coral and Fort Myers, but all of Florida as well.
Have questions? Give us a call at 239.415.6574.
In case you missed it, check out our last Title Junction post: What Are VA Home Loans?