UNDERSTANDING TITLE

WHAT IS TITLE INSURANCE

Title insurance is insurance against loss from defects in title to real property and from the invalidity or unenforceability of mortgage liens. It will cover you if a problem regarding title defects or legal ownership arises that was not discovered during the title search. Title insurance, and the search and examination process that takes place before a policy is issued, assures the homebuyer that the title to their property is clear, and that they are protected from any future challenges to their title. It protects the buyer’s home investment and assures the buyer that the property is really his or hers.

There are two types of title insurance:

  1. Owners Policy
    An owner’s policy insures the purchaser that the title to the property is free from defects, except those which are listed as exceptions in the policy. It is normally issued in the amount equal to the real estate purchase price and remains in effect for as long as the owner or their heirs retains an interest in the property.
  2. Loan/Mortgage/Lender Policy
    The lender’s policy is separate from the owner’s policy. It assures the validity and enforceability of the lien of the lender’s mortgage or deed of trust and serves as protection for the lender’s security interest in the property. A Loan Policy is issued to the lender in the amount of the loan, and liability decreases as the mortgage debt is reduced.

The difference between a Loan Policy and an Owner’s Policy is the length that each policy stays in effect. A Loan Policy expires when the loan is paid in full and an owner’s policy protects the owner’s in the property for as long as they or their heirs have an interest in the property.