A title insurance policy protects property owners and mortgage lenders from title defects. Examples of defects include liens, forged deeds or documents, claims from contested wills or lawsuits over errors such as boundary disputes and errors in public records.
So, does this policy continue to offer protection when the property owner refinances?
Here is what you need to know:
You need to repurchase a policy
When you refinance a mortgage loan, you receive a new one. Even if you refinance through the original lender, you will have a new loan with its interest rate and payment terms. Accordingly, you need to purchase a title insurance policy specifically for it.
The original policy decreases in coverage as you pay off the loan. By the time you are taking the new loan, the existing coverage might be substantially decreased. Thus, if it were to apply on the subsequent loan, you and the lender may be at high risk. A title insurance policy coverage must match the loan amount.
Your lender will require a title search when refinancing your mortgage loan to determine if the property has had any defects since the effective date of the previous title insurance policy.
Ask for a reissue rate
When repurchasing a title insurance policy, it’s vital to ask for a reissue or discount rate to save money. Note that you may need to meet some requirements to qualify for this discount. For example, your previous title insurance policy may need to have been issued within a particular time frame. The percentage of the discount you receive may also be determined by several factors.
Refinancing your mortgage loan offers many benefits. However, it also requires you to observe certain procedures. Legal guidance can help you learn more to make informed decisions.