Lender’s Title Insurance Policies, Everything You Need to Know

title insurance company in Philadelphia
Lender’s Title Insurance Policies, Everything You Need to Know

When you purchase real estate with a mortgage, there are a number of fees you’re required to pay. One of these fees will be for the lender’s title insurance. It may sound strange, at first, for you to pay for insurance for your bank. However, once you know the basics about lender’s title insurance, it becomes more clear why such a policy is needed. Here are the key facts that all potential home buyers should know about lenders’ title insurance.

What Is It?

Title insurance exists to protect the policy holder from any defects in the title that are revealed after the sale of the home. For example, if a home is found to have a lien against it years after you purchase it, title insurance will come into play. It will also come into effect if someone else is found to have a claim to the property after the sale.

Why Does the Lender Need It?

It’s important to point out that the lender’s title insurance protects the lender — your mortgage holder — and not you, personally. If someone has a claim or lien against the home, this policy ensures they can not come after the bank for the money they claim to be owed. The insurance company will instead pay any necessary costs.

Do You Have to Buy It?

Yes. If you take out a mortgage to purchase a home, buying a lender’s title insurance from a title service is required. You should be informed as to the cost of such a policy early on in the home buying process. It’s generally wrapped into your closing costs.

How Much Coverage Does It Offer?

A lender’s title insurance policy usually offers coverage equal to the loan amount. For example, if you take out a $200,000 mortgage, your lender will need a title insurance policy for $200,000. As you pay off your mortgage and the lender’s interest in your property decreases, the title insurance coverage decreases, too.

Should You Have Title Insurance, Too?

If you also want personal protection from any liens or claims against your property’s title, then you will need to purchase what’s known as owner’s title insurance. This is a separate title insurance policy from the one that protects your bank.

Owner’s title insurance is not required by law, except under some very specific circumstances. However, holding such a policy is a good idea, especially if you have reason to believe there may be claims or liens against the home that weren’t uncovered in the title search.

Purchasing a lender’s title insurance is an important part of any real estate transaction that involves a mortgage. If you’re looking for a title company Philadelphia residents rely on, consider Heritage Land Transfer. We’re a full-service title company and escrow agency that offers a superior experience, thanks to our client-centered approach and decades in the industry.