Lenders Title Policy
Why do I need to purchase a new title insurance policy on a refinanced loan?
To the lender, a refinance loan is no different than any other home loan. So, your lender will want to insure that its new loan is protected by title insurance, just as the original lender required. Therefore, when you refinance you are buying a title policy to protect your lender.
Why does a Lender need title insurance?
Most lenders generate loans and then immediately sell those loans to secondary market investors, such as FannieMae. FannieMae, in order to protect its security interest in the loan, requires title insurance coverage. Even those lenders who keep original loans in their portfolio are wise to get a lender's policy to protect its investment against title related defects.
When I purchased my home, didnâ€™t I also buy a lenderâ€™s policy?
Perhaps. Who pays for the lenderâ€™s policy on a purchase loan varies regionally and by the terms of individual contracts. However, even if you did buy a lenderâ€™s policy when you purchased your home, the lenderâ€™s policy remains in force only during the life of the loan that was insured. If you refinance, the old loan is paid off ( the "life" of the loan expires) and a new loan is issued for which the lender will require a new title insurance policy.
What about my original title insurance policy?
When you bought your home, you purchased a homeowner's title policy. The homeowner's policy stays in force as long as you or your heirs own the home. When you refinance, your lender will often require that you purchase a new lenderâ€™s policy to protect its new security interest in the property. Thus, you are buying a policy to protect your lender, not a new homeownerâ€™s policy.
What could possibly have happened since I purchased my home which warrants a new lenderâ€™s policy?
Since the time that the original loan was made, you may have taken out a second trust deed on the house or had mechanicâ€™s liens, child support liens or legal judgments recorded against you â€“ events that could result in serious financial losses to an unprotected lender. Regardless if it has been only 6 months or less since you purchased or refinanced your home, a myriad of title defects could have occurred. While you may not have any title defects, many homeowners do. The only way for a lender to adequately protect itself is to get a new lenderâ€™s policy each time you purchase or refinance your home.
Are there any special rates for title insurance on a refinance transaction?
Yes. There are special rates posted for refinances. For the premium on your next lenderâ€™s insurance policy please see our rate calculator