Understanding Title Policies – Why Lender’s Title Policy is Required and Why You Need Owner’s Title Policy
When you buy a property, you want to ensure that you are getting the ownership and the rights to the property that you paid for. However, there are many risks involved in real estate transactions that can affect your ownership rights. This is where title insurance comes in to provide protection against these risks.
In this blog, we will discuss what a title policy is, why a lender's title policy is required, and why you should get an owner's title policy.
What is a Title Policy?
A title policy is a form of insurance that provides protection to both the buyer and the lender in a real estate transaction. It ensures that the ownership rights to the property are clear and free of any liens or encumbrances that could affect your ownership rights. It also protects against errors or omissions in public records and other potential defects in the title.
Why is a Lender's Title Policy Required?
A lender's title policy is required by the lender to protect their investment in the property. If a buyer defaults on their mortgage payments, the lender could foreclose on the property and sell it to recover their investment. However, if there are any issues with the title that were not disclosed at the time of the transaction, the lender could lose their investment.
The lender's title policy provides protection against these risks and ensures that the lender's investment in the property is secure. The cost of the lender's title policy is typically paid by the buyer as part of the closing costs.
Why You Should Get an Owner's Title Policy
While the lender's title policy provides protection for the lender, it does not provide any protection for the buyer. This is why it is important for the buyer to also obtain an owner's title policy.
An owner's title policy provides protection to the buyer in the event that there are any issues with the title that were not discovered at the time of the transaction. This can include issues such as fraud, forgery, undisclosed heirs, or other defects that could affect your ownership rights.
An owner's title policy provides peace of mind for the buyer and ensures that their investment in the property is secure. The cost of the owner's title policy is typically a one-time fee paid at the time of closing.
In addition to providing protection, an owner's title policy can also help to speed up the closing process. By addressing any potential title issues before closing, the buyer can avoid delays and ensure a smooth transaction.
In summary, a title policy is a form of insurance that provides protection for both the buyer and the lender in a real estate transaction. While a lender's title policy is required to protect the lender's investment in the property, it does not provide any protection for the buyer. This is why it is important for the buyer to obtain an owner's title policy to ensure that their investment in the property is secure.
If you are in the process of buying a property, be sure to speak with your real estate agent or attorney about obtaining a title policy. It is an important investment that can provide peace of mind and protect your investment in the property.
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