In your closing cost, there is the inclusion of something known as title insurance. It is a one-time charge which protects the lender. But what exactly is it, and how does it benefit you and your property? Here is all you need to know about title insurance, what it covers, its costs and more.
What Is Title Insurance?
Deed records are not always wholly accurate; therefore, someone who possesses an older title can try to claim your recently purchased property. Title insurance is a type of indemnity insurance that shields homebuyers and lenders after suffering a monetary loss that comes with property title defects. It also functions as compensation if the property is lost.
The standard title insurance is the lender’s title insurance, which the borrower purchases to protect the lender. The other type is owner’s title insurance, which the seller often pays for to shield the buyer’s equity in the property.
Types of Title Insurance
When it comes to title insurance, there are two different kinds
- Lender’s Title Insurance
- Owner’s Title Insurance
Lender’s Title Insurance
Lender’s title insurance is to safeguard the mortgage lender and is mainly for their benefit; the buyer has to pay for it as part of the closing expenses. This title insurance guarantees that the lender has the first lien on the property if it has any unpaid property taxes or is ever foreclosed upon. The lender will be the first to obtain the proceeds if this situation occurs. There is only one instance where you do not have to pay the lender’s title insurance price if you purchase your home with cash. This means you have not borrowed any money to purchase the property, and therefore, you will not require any lender’s insurance. Although real estate attorneys suggest that it is in your best interest to get coverage even though it is not compulsory,
Owner’s Title Insurance
This title insurance is not compulsory and can be paid for by either the buyer or the seller. The title insurance is adequate immediately and is valid forever. The positive aspect of title insurance is that you are protected from known or unknown errors in the history of ownership documents. The owner’s title insurance is different from the lender’s as it only covers the property owners.
Why Is Title Insurance Necessary?
You are bound to purchase a lender’s title insurance when you buy the property with the help of a mortgage. It is also essential to protect yourself with the help of title coverage. This title
Insurance will prevent numerous legal issues and be beneficial if any other legal concerns arise. Title insurance also can compensate for damages incurred in case of unexpected events.
Here are a few scenarios when title insurance safeguards you:
- If you buy a house that once had unreported liens or easements
- If you are purchasing a house that has once transferred ownership rights via forgery
- Accidental mistakes in documentation and maintenance of record
- Other title defects that were present before you purchased the title insurance policy
There are numerous possibilities of documentation errors; therefore, it is wise to protect yourself. Title insurance is a cautionary measure that can save you thousands in legal fees. If you purchase a problematic or foreclosed home, the possibility of a defective title grows. In case you have to forfeit the entire property, the title insurance will cover you.
How Much Does Title Insurance Cost?
The mandatory lender’s title price can vary based on your state. It can cost between $500 – $1500 but can increase depending on how much you have borrowed. Every state has different requirements and regulations regarding title insurance. The owner’s optional title insurance can cost more. Depending on the coverage, it can range anywhere from $700-$2000. The price of it may increase in case people have:
- Low credit scores
- Large loan amounts
- Small down payments
To prevent yourself from any future complications, most real estate attorneys would suggest saving up and purchasing an owner’s title insurance as well, as it is beneficial in the long run.
So it could protect you even if you’ve sold the house. In some cases, you can negotiate to share title insurance prices with the seller and lender. This is a concern of practice that will depend on the jurisdiction.
Hire The Best Real Estate Attorney in Florida
If you’re concerned about Title insurance and its necessity in Florida, you require the assistance of Hale Law Services today. Get a qualified, board-certified real estate attorney to ensure your experience goes smoothly. Our skilled real estate attorneys can aid you with all legal compliances until the point of closing. We are well versed in state law and have the experience to deal with various legal issues. To learn more, contact 239-931-6767 or mail us at email@example.com.