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Is Title Insurance Necessary When Refinancing a Home?

December 6, 2016

What you need to know about title insurance for a refinance.

For those who are buying their first home or refinancing their fifth, title insurance is a must. The choices that you make around buying and financing a property are some of the biggest that you’ll ever make, so it’s important that you protect yourself, your investment, and have quality protection in place. This is where title insurance comes in handy, even when you’re refinancing!

A New Policy for the Original Loan

For those who are thinking that they already bought title insurance when they secured their home loan, be aware that a new title insurance policy must be bought when refinancing. The original lender’s title insurance policy protects the lender’s interest on the original loan. As you’re refinancing that loan, a new policy must be put in place to protect the new lender’s interest for the new loan.

Coverage for Costs

For homeowners considering a refinance, you’ll need to purchase lender’s title insurance because lenders won’t fund your mortgage without it. You may also choose to purchase an owner’s title insurance policy, although this is optional. Read on for insight on what these two policies cover.

  • Owner’s Title Insurance – This title insurance protects your equity in your home and will not need to be renewed. If your home is worth $350,000, and your first mortgage balance is $275,000, then the owner’s title policy protects your equity, the $75,000, should you face a claim or lawsuit.
  • Lender’s Title Insurance – As your mortgage lender has provided funds to you to finance your home, they need protection from title problems. Lender’ title policies are designed to protect your mortgage lender from losing legal claim to your home from issues, such as if you were to default on your mortgage loan. Because lenders title coverage lasts as long as the mortgage exists, once you get a new loan through refinancing, a new policy must be secured.

While financing a home is a big expense, refinancing and securing title insurance doesn’t have to be. If you use the same title company as with your current mortgage, you may get a substantial re-issue discount on the new lender’s policy, lowering your closing costs for the refinance.

For more ways on how you can save while staying protected, let the professionals at Fidelity National Title help. Our team works to secure the right title insurance for your budget, needs, and refinance. Contact us today to get started!