Do I Need Title Insurance to Refinance?

Posted by  on May 09, 2010

America is currently enjoying some of the best mortgage rates ever, and refinancing could save you a bundle over the life of your mortgage loan. Doing a home refinance usually involves a variety of closing fees and many people hoping to keep costs down wonder if they have to pay for title insurance again.

What Is Title Insurance?

Title insurance protects against losses from title defects. Title could be compromised for example if someone forges a homeowner's name to sell a property, or if a deed is recorded incorrectly. There could also be problems related to someone stating marital status incorrectly or having a name similar to someone else. The lender's policy, or CLTA, covers the lender only; purchase an owner's policy or ALTA to protect yourself.

Future Risks Must Be Covered

When you refinance, a new title insurance policy is issued to cover liens or other claims that may have come up since you took the original mortgage. Let's say you've lived in your home for nine years and still have the original mortgage. The original title insurance policy doesn't cover any defects that may have come up during those nine years. The new policy issued when you refinance does.

Even if you think the tile to your home is clear, it may not be. Title insurance can protect you against that possibility. The costs of a title insurance policy can vary depending upon where you live, but generally runs about $3.65 per $1,000 in value, Richard D. Vetstein, an attorney, told Boston.com. The policy is paid for with a one-time fee at closing.


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