What Is Lender’s Title Insurance and Why Do You Have to Pay for It?
Regarding the question, what is lender’s title insurance, there aren’t many experts who can give a thorough and complete answer. Even though the basic, underlying idea behind each lender’s policy is the same, there are many nuances involved, and not all the prices will reflect the reality of what the policy has to offer. Moreover, some lenders have no problem asking you to pay extreme amounts for lender’s insurance, which is another reason why choosing the right lending company should be among your top tasks.
What Is a Lender’s Title Insurance Policy?
So, what is lender’s title insurance anyway? As a homeowner, it’s important to understand the answer to this question, even though it might not concern you directly. Lender’s title insurance is a type of insurance that protects your lender from any legal problems that are related to the title of your home. If, for example, a past owner shows up and initiates legal proceedings against you and the home, lender’s insurance will protect the lender’s investment in your home.
Why Do You Need to Pay for Lender’s Title Insurance?
Lenders such as banks and mortgage companies will often partner with title companies and closing companies in order to obtain their lender’s insurance. The main reason why they ask the buyer (or the seller, in some areas) to pay for lender’s insurance is because the mortgage they offer is an investment that you and the seller will benefit from. As a result, protecting the lender’s interest is considered in your best interest as well. When questioning, what is lender’s title insurance really about, we find that the insurance cost is more of an add-on required by the lender in exchange for their willingness to lend you money for your purchase.
Understanding the Difference Between Owner’s and Lender’s Title
You might be asking yourself, what is lender’s title insurance, and how is it different from owner’s title policies? This question is very relevant, since only one of these insurance policies offers you any kind of protection. If homeowners require title protection against fraud and title disputes, they are free but not bound, to buy owner’s title insurance. Unlike an owner’s title policy, which protects only the homeowner, a lender’s title policy protects only the lender. Together, the two insurance premiums can be more advantageous when bought from the same company.
Choosing the Right Lender
If you want an owner’s insurance policy that protects you, and you’re looking to avoid paying too much on lender’s insurance, your best course of action is to find a dependable and trustworthy lender. Some lenders actually go the extra mile to help clients get the most out of their mortgage and out of any secondary deals such as the purchase of title insurance. Since every lender seeks viable title protection, you can be sure that the title company they choose can also offer reliable owner’s title insurance coverage. So, the question, “what is lender’s title insurance and why do I need it,” is naturally one that goes together with the need to buy dependable and affordable owner’s title insurance.