Why Do I Need Title Insurance For A Refinance or Second Mortgage?

Often homeowners just want to get a lower interest rate, save money on their mortgage payment or receive some extra cash.

Refinancing may save you money. A lower interest rate may reduce your monthly payments and you could save money by consolidating credit cards and personal debt into one monthly payment. You can refinance to shorten the term of your mortgage and payoff your loan earlier, or simply change your adjustable rate mortgage into a fixed rate mortgage. There are many options available. The fees for refinancing vary from lender to lender. When choosing a lender consider the costs and quality of the services provided. Research options and ask questions before filling out any application forms.

While you can expect to reap the benefits of substantially reduced monthly mortgage payments, you can also expect to pay the lender the typical closing costs associated with any mortgage loan.

Why do you need to buy title insurance again even though you purchased title insurance when you first bought your home and there is no change in ownership?

It’s because a separate policy is required by the lender insuring the validity of your mortgage when it is made.

For as long as you own the property your mortgage is valid, but it doesn’t insure the new mortgage created when you refinance, and it doesn’t provide protection against events that may have transpired between the time you purchased the property and when it is refinanced.

For example, you may have taken out a second mortgage on the new home that could threaten the priority of the new lender’s mortgage. Or, there could be legal judgments against you or a mechanic’s lien against the property by a supplier who wasn’t paid for home improvements.

Lenders also insist on a new title policy because many mortgages are packaged as securities and sold to investors in the secondary mortgage market. Title insurance is the only practical way to provide the assurance that investors demand and ensure that the mortgages backing these securities are valid and enforceable.

The process of refinancing a home is similar to purchasing one. However, for your refinance transaction you may qualify for a special title insurance rate based on the loan amount if you and/or us can provide a copy of your original Owner’s Title Insurance Policy on the property with an insuring value similar to the amount of your new loan. If so, we can “reissue” that policy at a lower rate and save you up to 40 percent of the cost of a new policy.

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