Jim Duncan posted a great video of local attorney Tim Kelsey discussing title insurance. If you are buying a house and aren’t familiar with title insurance, you should check it out.
As we all know, insurance is one of those necessary evils that you don’t want to spend your money on…but you can’t really live without it. None of us like cutting checks every month for health insurance, life insurance, homeowner’s insurance…or any other insurance. You rarely use it, but you’d have trouble sleeping at night if you didn’t have it.
Title insurance is the same thing. Just like your lender requires that you have homeowner’s insurance before you can close on your home, they also require ‘lender’s title insurance.’ Lender’s title protects the lender’s interest in the property against any defects in title or invalid mortgage liens. The owner’s title policy protects the buyer and their interest in the property.
For example, let’s say you buy a $200,000 property and put 20% down. The lender’s policy would be based on the $160,000 interest they have and the owner’s policy would be based on the $40,000 equity that you have in the property.