As you consider the many important tasks and decisions that you need to make before you close on a home, you may be feeling out of your depth about title insurance. Do you need it? What does it do? Even if you already know the answers to these questions, you may not be aware that you believe in some of the myths about title insurance—myths that could harm your financial security later. Be sure that you have the right answers to these common myths about title insurance before you make your decision about a policy.
Paying Cash For Your Home Or Paying Off The Mortgage Removes The Need For Title Insurance
Because you are often required to buy a title insurance policy for your lender when you purchase a home, you may feel that once the mortgage is gone—or if you never get a mortgage at all—you do not need to worry about title insurance. However, the reality is that even years after the mortgage is paid off, an issue could arise with your home’s title. Whether or not you have a mortgage is irrelevant; if previous liens or other problems with the property were not discovered, you will still be responsible for them if you do not have title insurance at the time that they are found.
The Lender’s Policy Covers You Too
As noted previously, almost all lenders will require you to purchase a title insurance policy for them as a part of closing. It is wrapped into your various other closing costs, and you may find yourself thinking that since you have clearly bought a title insurance policy, you are done with this step. However, be aware that the policy that you purchase for your lender does nothing for you, the homeowner. You secure a policy for your lender to protect their investment when they give you a mortgage, but you need a separate policy of your own if you want to be protected.
You Don’t Need Title Insurance If You Have Homeowner’s Insurance
Surely if you have homeowner’s insurance, it would protect you against becoming financially responsible for something like a lien that is discovered on the property, right? The answer is no; homeowner’s insurance and title insurance are two different things that cover entirely different areas. Your homeowner’s insurance will not assist you with a title issue, just like your title insurance policy will not help you to pay contractors after a tree crashes onto your roof. If you want protection against title issues at closing and beyond, you will need a dedicated title insurance policy.
Title Insurance Adds Another Monthly Cost To Your Plate
Buying a home is one of the largest purchases that most people will make in their lifetimes, and with this immense financial commitment in mind, most buyers are leery of adding any more costs to their plate. You will already need to be thinking of your mortgage, interest, any escrow, taxes and more, and the thought of adding title insurance to your monthly bills may make the policy seem like too much hassle or expense for what it is worth. However, title insurance works differently than the majority of other insurance types. Whereas you might pay your health insurance or car insurance every month, title insurance is a one-time fee.
Typically, it is calculated at a small percentage (about 1%, on average) of your home’s total value, and you pay it just once as a lump sum when you secure the policy. In this way, you can even wrap the cost of title insurance into your closing costs and then never think about it again.
Once you have paid for your policy, it is good for as long as you live in the home, and you will never have to pay for your policy again. For this reason, it is a wise choice to pay the one-off fee for the policy so that you can rest assured that your investment is protected.
Trust The Title Experts To Answer All Of Your Questions
Whether you have questions about how title insurance works or you would like to learn more about how to get started with a policy from a reputable lender, be sure to bring your concerns to an expert with years of experience in the field. The professionals at Mathis Title Company would be happy to help you understand how title insurance can work for you in your specific situation. Reach out to learn more, ask any questions that you may have and get started on the process of securing a policy that is right for you.