TYPES OF TITLE INSURANCE
There are two types of title insurance issued at settlement. – (1) the Loan Policy , which protects the lender’s investment against loss for unknown title defects. If you are getting a mortgage to purchase your property, the lender will require this . (2) the Owner’s Policy, which protects the buyer’s interests.
WHAT IS THE DANGER OF LOSS?
Why is the Owner’s Policy so important? As an example, assume real estate was purchased for $200,000, and a down payment was made of $40,000. The mortgage was $160,000. The Lender’s title coverage is for $160,000; but because of the Owner’s Policy, the buyer’s down payment is protected as well.
If a title problem occurs, the title company would protect the lender, but without an Owner’s Policy, the buyer would have to assume the financial burden of his or her own legal defense. If the defense is not successful, the result could be a total loss of down payment, other equity that may have accumulated, and the property. And the balance on the mortgage still would be due!
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