Title Insurance when Re-Financing your Loan

By
Real Estate Agent with Van Dorm Realty Inc.

Lower rates of interest have motivated you to refinance your home loan. The lower rate may save you an brilliant amount of funds over the life of the loan, but you ought to also expect to pay the lender the typical closing costs associated with any new loan, including service fees, points, title insurance protection & other expenses.
Why do I need to buy a new title insurance policyowner on a refinanced loan?
To the lender, a refinance loan is no different than any other home loan. So, your lender will require to insure that their new loan is protected by title insurance, as the original lender necessary. Therefore, when you refinance you are purchasing a title policyowner to protect your lender.
Why does a Lender need title insurance?
Most lenders generate loans & 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 receive a lenders policyowner to protect their investment against title related defects.
When I bought my home, didn't I also buy a lender's policy?
Perhaps. Who pays for the lender's policyowner on a purchase loan varies regionally & by the terms of individual contracts.
However, even in case you did buy a lender's policyowner when you bought your home, the lender's policyowner remains in force only in the work of the life of the loan that was insured. In case you refinance, the elderly loan is paid off (the "life" of the loan expires) as well as a new loan is issued for which the lender will need a new title insurance policyowner.
What about my original title insurance policyowner?
When you bought your home, you bought a Homeowners title policyowner. The Homeowners' policyowner stays in force as long as you or your heirs own the home. When you refinance, your lender will often need that you buy a new lender's policyowner to protect their new security interest in the property. Thus, you are purchasing a policyowner to protect your lender, not a new Homeowner's policyowner.
What could possibly have happened since I bought my home which warrants a new lender's policyowner?
Since the time that the original loan was made, you may have taken out a second trust deed on the house or had mechanic's liens, kid support liens or legal judgments recorded against you - events that could lead to serious financial losses to an unprotected lender. Regardless if it's been only 6 months or less since you bought or refinanced your home, a myriad of title defects could have occurred. While you may not have any title defects, lots of Homeowners do. The only way for a lender to adequately protect itself is to receive a new lender's policyowner each time you buy or refinance your home.
Are there any discounts available for title insurance on a refinance transaction?
Yes. Title companies offer a refinance transaction discount or a short-term rate. Discounts may even be available in case you use the same lender for your refinance loan & your original loan. Be positive to ask your title company how they can save you funds.

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In Tennessee, if your old owner's policy is less than 10 years old they will give you a re-Sissue price which is a substantial discount.i

July 18, 2010 10:20 AM #1
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Rainer
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Tiffany Wallace-Olympia

Lacey-JBLM Real Estate
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