Why You Need To Use a Title Company When Refinancing Your Home
Purchasing a house is one of the biggest financial decisions you can ever make. However, even once you sign all the necessary paperwork to claim ownership, you may have further critical financial decisions to make down the line. For instance, if you decide that you want to refinance the mortgage on your home, you’ll have to prepare accordingly.
One of the most important aspects of this step is hiring a title insurance company.
A title insurance company is a company, separate from your lender, which provides insurance for both homeowners and their lenders. In a typical purchase scenario, there will be two title insurance policies. One will be for the buyer of the house and will verify their rightful ownership of the property. The other will be held by the lender (such as a bank) and will protect their interests should any problems arise. While other insurance policies concern themselves mainly with physical damage to your home, an Owner’s Title Insurance Policy’s primary concern is ownership and a Lender’s Title Insurance Policy’s primary concern is protecting the lender’s lien rights.
Owner’s and lender’s title insurance are also distinct in terms of duration.
An owner’s title insurance policy lasts as long as you are the owner of your property. A lender’s title insurance policy will end once your mortgage is paid off. Once that’s accomplished, your lender no longer has an interest in your property. When you refinance your mortgage, you’re essentially applying for a new mortgage. If you choose to refinance, you’ll need to purchase a new lender’s title insurance policy. Your lender will most likely require it. If you already purchased title insurance policies when you first purchased the house, this shouldn’t be anything new. You will hire a title insurance company, which will check all the necessary documentation in order to ensure that you are the rightful owner of the property, as well as issue the lender’s title insurance policy. You should be aware that problems with a title can arise for several reasons. For instance, if you’re found to be delinquent in crucial payments, such as owed property or IRS taxes, you could have a problem securing a new lender’s title insurance policy.
Refinancing will also incur closing costs.
Refinance closing costs can range based on factors such as the loan amount as well as the home’s insurance and escrow accounts (funds held by your bank to pay insurances and property taxes). You should be wary of claims of “no closing cost refinance.” In these situations, the lender covers various costs to help ensure your initial fee is less than it typically would be. However, your long-term mortgage payment would be much higher. It may be in your best interest to have put aside money in advance for closing costs rather than overpaying later.
At Title Partners of South Florida, we have an experienced team of professionals who have been serving the state of Florida for over 22 years. We are here to ensure the final steps before your closing proceed smoothly – whether you’re purchasing a new home or refinancing the mortgage on your home.