- “I know that lenders protect their interests when providing funds to home buyers by obtaining a loan policy of title insurance. Does this policy cover any of my interest or equity ?”
- “If I do not have title insurance what can happen ?”
- “If I were to lose my property because someone successfully claims right to it, would I still have to pay off my mortgage note ?”
- “Even if I have no title insurance, the equity I have built up in my house cannot be affected. It is always mine, right ?”
- “If I purchase title insurance, what can I expect ?”
- “How can there be a title defect if the title has been searched and a loan policy issued ?”
No it does not. A lender goes to great lengths to minimize the risk of lending money for the purchase of real estate. First, credit is checked as an indication of the borrower’s ability to repay the loan. Then, the lender seeks assurance that the quality of the title to the property to be acquired and which will be pledged as security for the loan is satisfactory. The lender does this by obtaining a loan policy of title insurance. This policy covers only the lender. It is up to you to protect your interests with a title insurance policy of your own.
As an example, assume real estate was purchased for $100,000. A down payment of $20,000 is made, and a lender holds an $80,000 mortgage lien, or beneficial interest. The lender acquires title insurance protecting the lender’s interest up to $80,000. But the purchaser’s down payment of $20,000 is not covered. What if some matter arises affecting the past ownership of the property? The title insurance company would defend and protect the interest of the lender. The purchaser, however, would have to assume the financial burden of his or her own legal defense. If the defense is not successful, the result could be a total loss of title.
Yes, you are still liable to the mortgage lender even though you can no longer claim title to the property.
No, your equity can be affected by a claim to your property’s title.
Title insurance will pay for defending against any lawsuit attacking the title as insured, and will either clear up title problems or pay the insured’s losses up to the policy limits. For a one-time premium, an owner’s title insurance policy remains in effect as long as the insured, or the insured’s heirs, retain an interest in the property, or have any obligations under a warranty in any conveyance of it. Owner’s title insurance, issued simultaneously with a loan policy, is the best title insurance value a property owner can get.
Title insurance is issued after a careful examination of copies of the public records. But even the most thorough search cannot absolutely assure that no title hazards are present, despite the knowledge and experience of professional title examiners. In addition to matters shown by public records, other title problems may exist that cannot be disclosed in a search.
Here are some of the more common ways a person can lose title to his or her home:
- Mistakes in recording legal documents.
- False impersonation of the true owner of the property.
- Forged deeds, release, or wills.
- Undisclosed or missing heirs.
- Instruments executed under invalid or expired power of attorney.
- Deeds by persons of unsound mind.
- Deeds by minors.
- Deeds by persons supposedly single, but in fact married.
- Liens for unpaid estate, inheritance, income or gift taxes.
- Misinterpretation of wills.
The cost of title insurance varies from state to state. It is regulated in most states including Tennessee.
Title Insurance is paid for in one lump sum when the home is purchased.
Yes. Title insurance lasts as long as the home is owned by the same owner.