What is a title?
When you purchase a home, you are really purchasing the title to the property -- which is the right to occupy and use the property. That legal right is usually documented in the form of a deed recorded at the local courthouse. A title may be contested based upon past rights and claims asserted by others. These types of claims can complicate your purchase of the property, or challenge your ownership later on, and potentially cause you to lose money.
Why do you need title insurance?
A home is often the largest single investment any of us ever make. Title insurance protects against loss of value from defects that may exist in the title, or arguments made by others that such defects exist. These defects or problems include fraud, forged signatures on deeds, unknown heirs or previous owners, liens and documentation errors. If you were uninsured and your right to the title is challenged, you could lose significant money defending yourself -- you could even lose your home.
How does title insurance protect you?
An owner's policy of title insurance protects a buyer against defects in the title of the property, either clearing up title problems or paying for your losses. For a one-time premium generally paid at closing, an owner's title insurance policy remains in effect as long as you, or your heirs, retain an interest in the property.
How does title insurance protect the lender?
A lender's policy of title insurance protects the lender that financed a piece of real estate against loss caused by defects in the owner's title.
Why do I need title insurance on a refinance?
Title insurance on a refinanced mortgage is usually offered at a reduced rate, and it assures your lender that you actually own the property. It insures that no one else has a preemptive position in front of the lender, and if someone does, it pays the lender's losses.
Why do I need title insurance on a brand new house?
Even if your home itself hasn't had previous owners, the land that it stands on has. Your policy insures you as the owner of a specific piece of property. It clarifies the property rights and insures that your builder hasn't used it as collateral on another loan, that there are no unidentified easements affecting your property and that no problems will surface to hurt you later.