Title Insurance When Refinancing Your Loan
Lower interest rates have motivated you to refinance your home loan. The lower rate may
save you a tremendous amount of money over the life of the loan, but you should also
expect to pay the lender the typical closing costs associated with any new loan, including
service fees, points, title insurance protection and other expenses.
Why do I need to purchase a new title insurance policy on a refinanced loan?
To the lender, a refinance loan is no different than any other home loan. So, your lender
will want to insure that their new
loan is protected by title insurance, just as the original lender required. Therefore, when
you refinance you are buying a title
policy to protect your lender.
Why does a Lender need title insurance?
Most lenders generate loans and then immediately sell those loans to secondary market
investors, such as FannieMae. FannieMae, in order to protect its security interest in the
loan, requires title insurance coverage. Even those lenders who keep original loans in
their portfolio are wise to get a lenders policy to protect their investment against title
related defects.
When I purchased my home, didn't I also buy a lender's policy?
Perhaps. Who pays for the lender's policy on a purchase loan varies regionally and by
the terms of individual contracts. However, even if you did buy a lender's policy when you
purchased your home, the lender's policy remains in force only during the life of the loan
that was insured. If you refinance, the old loan is paid off (the "life" of the loan expires)
and a new loan is issued for which the lender will require a new title insurance policy.
What about my original title insurance policy?
When you bought your home, you purchased a homeowners title policy. The
homeowners’ policy stays in force as long as you or your heirs own the home. When you
refinance, your lender will often require that you purchase a new lender's policy to protect
their new security interest in the property. Thus, you are buying a policy to protect your
lender, not a new homeowner's policy.
What could possibly have happened since I purchased my home which warrants a
new lender's policy?
Since the time that the original loan was made, you may have taken out a second trust
deed on the house or had mechanic's liens, child support liens or legal judgments
recorded against you - events that could result in serious financial losses to an
unprotected lender. Regardless if it has been only 6 months or less since you
purchased or refinanced your home, a myriad of title defects could have occurred. While
you may not have any title defects, many homeowners do. The only way for a lender to
adequately protect itself is to get a new lender's policy each time you purchase or
refinance your home.
Are there any discounts available for title insurance on a refinance transaction?
Yes. Title companies offer a refinance transaction discount or a short-term rate.
Discounts may also be available if you use the same lender for your refinance loan and
your original loan. Be sure to ask your title company how they can save you money.
Article by CLTA
save you a tremendous amount of money over the life of the loan, but you should also
expect to pay the lender the typical closing costs associated with any new loan, including
service fees, points, title insurance protection and other expenses.
Why do I need to purchase a new title insurance policy on a refinanced loan?
To the lender, a refinance loan is no different than any other home loan. So, your lender
will want to insure that their new
loan is protected by title insurance, just as the original lender required. Therefore, when
you refinance you are buying a title
policy to protect your lender.
Why does a Lender need title insurance?
Most lenders generate loans and then immediately sell those loans to secondary market
investors, such as FannieMae. FannieMae, in order to protect its security interest in the
loan, requires title insurance coverage. Even those lenders who keep original loans in
their portfolio are wise to get a lenders policy to protect their investment against title
related defects.
When I purchased my home, didn't I also buy a lender's policy?
Perhaps. Who pays for the lender's policy on a purchase loan varies regionally and by
the terms of individual contracts. However, even if you did buy a lender's policy when you
purchased your home, the lender's policy remains in force only during the life of the loan
that was insured. If you refinance, the old loan is paid off (the "life" of the loan expires)
and a new loan is issued for which the lender will require a new title insurance policy.
What about my original title insurance policy?
When you bought your home, you purchased a homeowners title policy. The
homeowners’ policy stays in force as long as you or your heirs own the home. When you
refinance, your lender will often require that you purchase a new lender's policy to protect
their new security interest in the property. Thus, you are buying a policy to protect your
lender, not a new homeowner's policy.
What could possibly have happened since I purchased my home which warrants a
new lender's policy?
Since the time that the original loan was made, you may have taken out a second trust
deed on the house or had mechanic's liens, child support liens or legal judgments
recorded against you - events that could result in serious financial losses to an
unprotected lender. Regardless if it has been only 6 months or less since you
purchased or refinanced your home, a myriad of title defects could have occurred. While
you may not have any title defects, many homeowners do. The only way for a lender to
adequately protect itself is to get a new lender's policy each time you purchase or
refinance your home.
Are there any discounts available for title insurance on a refinance transaction?
Yes. Title companies offer a refinance transaction discount or a short-term rate.
Discounts may also be available if you use the same lender for your refinance loan and
your original loan. Be sure to ask your title company how they can save you money.
Article by CLTA
Still have questions? Contact me today for a
free consultation!
free consultation!
Colin O’Neal
Buyer’s Agent
200 Rufe Snow North, Suite 202
Keller, TX 76248
(817) 898-0145 Office
(817) 898-1771 Fax
colin@househuntersdfw.com
Buyer’s Agent
200 Rufe Snow North, Suite 202
Keller, TX 76248
(817) 898-0145 Office
(817) 898-1771 Fax
colin@househuntersdfw.com
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