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Title Insurance When Refinancing Your Loan

Lower interest rates have motivated you to refinance your home loan. The lower rate may save you a tremendous amount of money over the life of the loan, but you should also expect to pay the lender the typical closing costs associated with any new loan, including service fees, points, title insurance protection and other expenses.

Why do I need to purchase a new title insurance policy on a refinanced loan?

To the lender, a refinance loan is no different than any other home loan. So, your lender will want to insure that their new loan is protected by title insurance, just as the original lender required. Therefore, when you refinance you are buying a title policy to protect your lender.

Why does a Lender need title insurance?

Most lenders generate loans and then immediately sell those loans to secondary market investors, such as FannieMae.

FannieMae, in order to protect its security interest in the loan, requires title insurance coverage. Even those lenders who keep original loans in their portfolio are wise to get a lenders policy to protect their investment against title related defects.

When I purchased my home, didn’t I also buy a lender’s policy?

Perhaps. Who pays for the lender’s policy on a purchase loan varies regionally and by the terms of individual contracts.

However, even if you did buy a lender’s policy when you purchased your home, the lender’s policy remains in force only during the life of the loan that was insured. If you refinance, the old loan is paid off (the “life” of the loan expires) and a new loan is issued for which the lender will require a new title insurance policy.

What about my original title insurance policy?

When you bought your home, you purchased a Homeowners title policy. The Homeowners’ policy stays in force as long as you or your heirs own the home. When you refinance, your lender will often require that you purchase a new lender’s policy to protect their new security interest in the property. Thus, you are buying a policy to protect your lender, not a new Homeowner’s policy.

What could possibly have happened since I purchased my home which warrants a new lender’s policy?

Since the time that the original loan was made, you may have taken out a second trust deed on the house or had mechanic’s liens, child support liens or legal judgments recorded against you - events that could result in serious financial losses to an unprotected lender. Regardless if it has been only 6 months or less since you purchased or refinanced your home, a myriad of title defects could have occurred. While you may not have any title defects, many Homeowners do. The only way for a lender to adequately protect itself is to get a new lender’s policy each time you purchase or refinance your home.

Are there any discounts available for title insurance on a refinance transaction?

Yes. Title companies offer a refinance transaction discount or a short-term rate. Discounts may also be available if you use the same lender for your refinance loan and your original loan. Be sure to ask your title company how they can save you money.

Article by CLTA

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Cindy Paterson 
Email- cindypaterson.realtor@gmail.com
Cell: 405-473-3239
Metro Brokers Of Oklahoma
Office: 405-520-8963
Fax: 405-703-3255
License #138626

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Cindy is the utmost professional bringing all her expertise but also a personable, friendly perspective during a house hunt. She helped us look ALL DAY LONG and gave us terrific advice and feedback. She helped us purchase our dream house and we highly recommend her. We hope to stay in this home forever but if we ever did move again, there would be no doubt who to call. Julia Wagner Leinen
Cindy was such a blessing to my husband and I when we were looking to buy our first house. She carefully sought out houses and neighborhoods that's would fit our needs. She gave us multiple options and was always available when we had questions. When we finally decided on a house, she did an awesome job communicating with the sellers, and working out a great deal for us! I thought buying a home would be so stressful and hard because we are young and don't know much about real estate. But with Cindy, it was a breeze and an exciting process! I can't think of anyone else I would rather have partnered with when looking for a home for my family! Mike and Kaci Moore
Cindy is a superb realtor and guided us through every step of the home-buying process with the upmost professionalism. She was easy to reach and always kept us updated on the status of our paperwork. We couldn't be more be pleased with Cindy and recommend her without hesitation to anyone wanting to buy or sell a home. Brian and Maria Sargent
Cindy was so easy to talk to & made us feel comfortable as she walked us through the processes step by step. She updated our education on Oklahoma properties. When I was fretful, she would remind me that God would lead us to the right place. After a snafoo after closing, she jumped at the chance to make things right. Thank you, Cindy! Don and Sue Ann Wagner
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