By: Daniel Odrezin, Heights Title
Title insurance is a form of insurance that a purchaser of a home or a lender on a home purchase wants to obtain to ensure that they have all ownership rights to the property. That there’s no one else out there that has a claim to ownership. Lenders want to ensure that the person they lent money to is the valid property owner in case they were to have to foreclose in the future and know they would have all the same rights that the purchaser had.
Our Title Company in Birmingham, AL issues a policy to ensure that when someone purchases a property, they know they have full property ownership rights. Title insurance is often paid for in full at closing. It is a one-time payment. So what happens if you refinance your home?
Do You Have to Pay Title Insurance When Refinancing Your Home?
A title insurance policy protects the purchaser and the lender throughout the time the home is owned or has a loan. Someone doing a refinance typically will not need a new title insurance policy because the policy they got when they purchased the property lasts the entire time they own the home. So even if you get a new loan, the policy you purchased will protect you throughout the time of ownership. When refinancing, many people think they are getting a new title insurance policy, but they’re just buying a new title insurance policy for the lender.
Lender Requirments For Title Insurance
On the other hand, a lender, even if it’s the same lender that your initial loan was with, will want a new title insurance policy when closing on the refinance.
They will typically want a new title insurance policy because they want to ensure that nothing’s happened since they first made the loan to now that would encumber the property; you haven’t sold it to somebody else without telling anybody.
Lender requirements may vary but often include the following:
- A title search completed by a title company
- All other loans on the property are paid off
- A clear title insured by a title company
What Happens To My Current Owner’s Title Insurance Policy?
Your owner’s policy does not change during a refinance. The same owner’s policy that was in effect when you purchased the property is still in effect when you refinance.
There are some situations if, for instance, the purchaser does a significant renovation to the home, and it is now worth more than what it was worth when bought. Sometimes, somebody may want to get a new title insurance policy for a larger amount because the title insurance coverage is for the amount you paid for the property.
In short, you can get a new owner’s title insurance policy when you refinance, but it is unnecessary.
What is the Title Company’s Responsibility During a Refinance?
It’s our job to ensure that if there are any encumbrances on the property, those are addressed and taken care of prior to or at closing. Heights Title also handles the loan paperwork and documents and executes everything correctly. We will oversee the refinance closing process and work with the lender to ensure all the title requirements have been met.
Heights Title will take funds from the lender to pay off the previous loan and ensure all new mortgage documents are entered into public records so the title is clear going forward.
Title Insurance With Heights Title
Heights Title serves Birmingham and surrounding areas providing top-tier customer service for title searches and title insurance. Our experts are ready to help you navigate the residential real estate closing process and get into your dream home with a clean title.
When you are ready to buy a home, choose Heights Title.
This material is provided as a courtesy and for educational purposes only. Please consult your title professional for specific information regarding your situation.