Many people refinance their homes when they need cash, whether for debt consolidation or investment property. If the home is owned free and clear, the borrower only needs to bring money to closing to cover recording fees and other costs. But if there is a mortgage on the house, most states require that the new loan be insured by the same title company that issued coverage on the original loan.
What Is Title-Insurance?
This is a policy that insures the beneficiary of a property’s title against any previous claims or liens on the property. As long as you continue to pay your premiums, your insurance company will defend and settle any claims against your ownership of the home.
Why Do I Need Insurance?
It is designed to protect your interests as the owner on record on the property. If, after you’ve closed on the refinancing, someone comes forward with evidence that they legally possess or own part of your home, your title insurer will step in and either defend you against any claims or work out a settlement with the claimant.
Types of Title Insurance
We can break them down into two types:
Lender’s Insurance: This is the type of policy issued by a title insurer to protect a lender’s interests in collateral. If you have a mortgage, your lender will require that you carry an owner’s insurance policy for protection against claims and liens.
Owner’s Insurance: Individuals purchase this type of coverage to protect their properties. A homebuyer purchases this policy to ensure clear ownership of the property, free from future claims or liabilities. When you purchase an owner’s insurance policy, your insurer will also prepare a property survey that shows the exact boundary lines of your real estate property.
In What Situations Can Insurance Can Protect Me?
Issues may arise that can affect your ownership of your property. If you purchased an owner’s insurance policy, then you should be covered in the following cases:
The previous owner improperly discharged a mortgage or satisfied a lien but failed to indicate this on their deed.
The previous owner did not have the right to sell your property or had made any misrepresentations on their deed of ownership.
Some undisclosed heirs can claim your ownership. Heirs may stake claim to some portion of the home while you live there. Insurance covers claims by unknown heirs that surface after you purchase your home.
If you’re unsure whether your Deerfield Beach title insurance policy covers you, ask your title insurer for a list of the types of claims that are not covered by their policy. It would be best if you were careful to read and understand all provisions in any insurance policy you purchase before signing it. This way, you will know what claims or issues your particular Deerfield Beach insurance policy will not cover.