Refinancing your property has its benefits. In fact, it’s often a great way to take advantage of lower interest rates. However, it’s important to consider all the elements involved. When refinancing, your lender will very likely require that you invest in title insurance. Learn more about why title insurance is required for refinancing your property.
Refinancing Requires a New Loan.
When refinancing your property, the process treats the transaction as a new loan. With a new loan, your previous insurance does not carry over. Instead a new title insurance policy is required.
Security for Your Lender.
When issuing a loan, there’s plenty of risk involved. From legal judgments to taking out a second deed, many things could have happened since you first purchased a lender’s title policy. Therefore, your lender requires you to invest in the right insurance coverage. A title insurance policy helps to give them the security that they need, especially when using secondary market investors. When granted a loan a lender usually sells the loans to secondary market investors. These investors then require insurance coverage.
You likely had insurance to protect your original loan. Whether you purchased a policy for your lender or yourself, it’s important to understand the terms of your policy. Policies for lenders vary. However, coverage tends to only last for the duration of the loan. When you refinance, your original loan expires. Therefore, you must buy new coverage. When it comes to your own title policy, your coverage tends to last for the duration that you own the home. Since you’re not moving, your homeowner’s title insurance should remain intact. However, it’s wise to consult with the specifics of your policy. When buying a new policy when refinancing, you’re purchasing a new lender’s title policy to protect their security interest.
To learn more about title insurance when refinancing your property, contact your Fidelity National Title Sales Executive!