As you make your way through the property buying process, you will encounter a lender who will lend you the money to purchase your property. However, they will usually require specific elements to be in place before they can lend you the money. For example, lenders will require you to procure your home insurance which covers the structure against damage. They will also require you to pay for a lender’s title insurance policy.
A lender’s title insurance policy not only protects the bank but also protects you. So, if your new home burns down, your house insurance will pay to rebuild it. This is a much better option than owing money on a house that burned down without any money to rebuild it. The same goes for title insurance; the lender protects themselves and you. If there is an issue with the title, it will likely be found during the title search. If not, something can still pop up many years down the road which is why you should partner with our title agency in New Jersey.
What is a lender’s title insurance policy?
When talking about title insurance policies for owners vs. lenders, it helps to define what each one does. A lender’s title insurance policy covers the bank’s interest in the property. The coverage amount is reduced as the mortgage is paid, and the policy expires when the loan is paid off. During the underwriting process, the title company also runs a title search to ensure the title is free and clear.
Is there an owner’s title insurance policy?
Yes, an owner’s title insurance policy covers your entire interest in the property. So, let’s say the property was a $500,000 purchase. You had to borrow $100,000. The bank will require you to purchase a lender’s policy to cover their interest in your $100,000 loan. You would also take out an owner’s policy to cover the property’s total value.
The other benefit to an owner’s policy when looking at title insurance policies for owners vs. lenders is that you can purchase title insurance for yourself even if you didn’t take out a mortgage on the home. This protects you from buying a property with a defective title that you or your heirs will only discover when you (or they) attempt to sell the property. Problems like this can be challenging to resolve without title insurance.
Which policy should I get?
The answer is most likely to purchase an owner’s title policy to protect yourself. Besides, if the bank requires it, you must also buy a lender’s policy. But remember that the lender’s policy only covers their interest in the property for as long as there is a loan. Because their coverage ends when the loan is paid off, you need a policy that will continue to protect you for as long as you have an interest in the property.
Do I still need a title insurance policy if I don’t have a loan?
Yes, we 100% recommend protecting the integrity of your property purchase with an owner’s title insurance policy. Title insurance will give you a clean title and peace of mind and make the property easier to sell in future.
At Cortes & Hay, we’ve provided New Jersey with accurate and prompt title insurance services for over 50 years. To learn more about title insurance policies for owners vs. lenders, don’t hesitate to get in touch with us!