Mortgage lenders require title insurance, and for good reason. Title insurance protects your investment (and theirs) and your ownership of the home.
Why Title Insurance is Worth the Cost
What if, after closing, an individual contacted you and said, “My grandma used to live in that house and I am an heir to the property. Sorry to inform you, but I actually own this home, and I never authorized it to be sold.”
What if a roofing contractor said he was never paid for his work and you find out there is a lien, and now you are being sued in court for payment of the roof over your head?
What if a previous owner got a divorce and the ex-spouse is now suing for his or her half of ownership?
What if another individual somewhere in the country has your same name, and that person owes an attorney tens of thousands of dollars, and now that attorney has placed a lien on every person they can find with that name?
All of these scenarios have happened, and you might be surprised at how often. Title problems occur in more than a third of residential real estate transactions, according to Ticor Title.
These are only a few of a myriad of things that could cost you big without title insurance to protect your good name and ownership.
The good news is that title insurance is a one-time fee paid at closing. There is no monthly bill and yet the insurance protects you as long as you own the property — and it extends to your heirs. However, if you refinance, you will need to buy another title search and policy due to having a new mortgage loan.
It’s easy to see why a mortgage lender won’t invest hundreds of thousands of dollars in a home without the safety of title insurance.
What if you pay cash? Is title insurance required then?
No, title insurance is optional. But knowing the pitfalls, who would be foolish enough to forego this protection?
If you pay cash and didn’t buy title insurance, can you add it later?
No, the only time you can buy title insurance is at closing. This is when the insurance company searches the history and clears any false liens, judgments, errors, fraudulent claims, etc.
So, when you see that seemingly large fee on your Closing Disclosure, go ahead and smile, because title insurance is keeping you safe from so many financial nightmares.