As you go over the financial statements about the closing on your new home, you may notice what seems like a duplicate charge. Those with a mortgage will have to pay for two forms of title insurance.
Although you may cancel the borrower’s policy, you will absolutely have to pay for the lender’s policy. While canceling the policy that applies to you would, in theory, save you a couple of thousand dollars in closing costs, it will also leave you in a very dangerous situation if there are ever issues with the property’s title.
What exactly does title insurance do for you?
Title insurance helps you protect your home
When another person comes forward with a potential title claim to your property, you will likely have to go to court to defend your ownership rights. It can be a long process that involves substantial research. Your title insurance policy will cover the cost of an attorney to represent you during the title dispute.
Your policy also protects you if you lose in court
Ideally, the attorney representing you will be able to show that the alleged deed is fraudulent or otherwise successfully defend it against the title claim. Unfortunately, sometimes someone else really does have a valid right to claim ownership of your home. When that occurs, title insurance will pay you back for what you have invested in the property, including your downpayment and the equity you have accrued since closing.
Understanding how title insurance protects you can help you make better choices as you move forward with a residential real estate transaction.