There are two types of Title Insurance Policies:
- Owner’s Title Insurance
- Lender’s Title Insurance (also known as Mortgagee)
Owner’s Title Insurance
Title Insurance rates are set by the State of Florida as promulgated rates. That is, the State dictates what the minimum charge is.
Owner’s Title Insurance is a one-time cost, and is relatively inexpensive in relation to other types of insurance which are renewed every year. This is because your lender will require a Lender’s Title Insurance Policy, which you must pay for anyway. If a Lender’s Title Policy is issued in conjunction with an Owner’s Policy, the promulgated rate for the lender’s policy is only $25.00, although most companies, like ours, charge a little bit more. As long as it is disclosed, that $25.00 fee can be any amount! We generally charge $125.00 for simultaneous issue.
For example, if you are buying a home for $200,000.00 and are getting a $180,000.00 mortgage, the promulgated rate for the lender’s title insurance would cost $975.00. An Owner’s Policy for the purchase amount would cost $1,075.00 With the simultaneous issue of the Mortgage Policy of $125.00, the total would be $1,200.00. So for an additional $225.00, you have purchased yourself $200,000.00 worth of invaluable protection.
Owner’s Title Insurance insures you for as long as you own the property and gives you piece of mind. This policy covers many possible title defects such as:
Existing liens in the public records
Outstanding maintenance fees other than those not disclosed
Loss of use
While you may say that if the title company searched the records and everything was fine so why do you need title insurance, here are a few scenarios that could cost you time, money and maybe even your home:
Forged Deeds: You bought your new home from John Seller and Mary Seller, his wife. John Seller comes to closing with a properly executed Warranty Deed executed by both he and Mary. The title company examines the Deed, sees that it is executed properly in accordance with the laws of the State of Florida, and the closing proceeds smoothly. After closing, you move your furniture in and then a week later, you have a knock at the door. Why it’s Mary Seller. She just returned from taking care of her father in Michigan and what are you doing in her home? You show her the Deed she signed with her husband, John. Guess what? She did not sign the Deed and had no idea the house was sold. She insists you get out of HER house.
Forged Satisfactions: During the information gathering process, the seller told the title company that they own the house free and clear, meaning that there is no existing loan on the house. The title examination found that there was a loan at one time, but it was satisfied a month ago and executed properly in accordance with the laws of the State of Florida. About two months after closing, you receive a Notice of Lis Pendens from the bank, or more likely the private mortgage holder, that still has a mortgage on your home and that foreclosure proceedings are about to begin.
Probate Issues: You bought your new home from Jim Seller who bought his home from the Estate sale of the dearly departed Leslie Late. A year later, the long-lost son of Leslie Late stops by and informs you that he never received his share of the proceeds of the sale to Jim Seller. He now wants you to give him 1/2 of the sales price as his share of the inheritance!
Unsatisfied Mortgages: When you bought your home, the title company paid Anywhere Bank the funds to satisfy your seller’s existing mortgage on the home. So far, so good. Three years later, you go to refinance or sell the property and the title company you are using tells you that there is an outstanding mortgage to Anywhere Bank. You call the title company that handled your purchase, but they have gone out of business. You try to find Anywhere Bank, and they have been bought out. If you have an Owner’s Title Insurance Policy, your title company could possibly ignore the mortgage by utilizing an existing indemnification treaty many title insurers have with each other.
As you can see, though not common, these are but a few of the issues that can arise that could cost you thousands of dollars and, possibly, your new home! Thank goodness you purchased that Owner’s Title Insurance policy!
Lender’s Title Insurance
If you are obtaining financing on your home, your lender will insist on a Mortgagee’s Title Insurance Policy being issued. It protects the lender, only, and affords you no coverage or protection. Lender’s Title Insurance is required anytime you obtain financing on a property, whether in conjunction with a purchase or during a refinance. In addition, lenders will require you to have an existing survey or a new survey before the title company can issue them a clear title insurance commitment.
When it is time to refinance your home, as long as you have an existing Owner’s Title Insurance Policy in the name of anyone on title, any reputable title company will be able to issue your lender the Lender’s Title Insurance Policy at a reduced rate to you, possibly saving you hundreds of dollars.