If you are buying a house for the first time, then you know that it is a large investment that brings with it a lot of costs. However, you should keep in mind that some things are invaluable and that you should never neglect when buying a home, regardless of their price.
Taking the time to think at the outset about what is important to buy can be very helpful in the long run. Having the right flood insurance, homeowners insurance, as well as title insurance can protect your investment from unforeseen situations and prevent money loss. And a lot of stress, of course.
What exactly is title insurance?
Title insurance is a type of insurance that is not as popular as some other types, but it doesn’t mean this won’t change in the future. Having this insurance policy is just as important as insuring against fire, flood and other unforeseen events. What makes title insurance different from others is that it applies not only to the future, but also to events from the past and protects you as the new homeowner.
When selling a property, the seller (i.e. the previous owner) transfers ownership of the property to the buyer (i.e. the new owner) through a contract. This can bring with it some undesirable situations for the buyer if they do not protect themselves from them in time by purchasing a title insurance policy. If the previous owner did not pay property tax or she or he participated in ownership disputes that were not concluded, without title insurance, all this will become your problem as the new owner. After all, you have signed a contract and thereby accepted the occupation of the space and its use, but also other obligations that come with it.
However, with title insurance you can enjoy your new home while protecting your property from all past events that could lead to legal and financial challenges. Most customers inquire thoroughly about the condition of their future property and whether there are any past situations they should be aware of. However, sometimes they are really hard to detect, so having title insurance saves you worries and allows you to be peaceful when buying a new home, because the policy protects you from many potential problems.
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Different kinds of title insurance
There are two basic types of title insurance, depending on who this insurance policy protects against potential financial and legal problems related to the actions of the previous owner.
Lender’s title insurance
The first type of title insurance is one that protects the lender from financial losses that could occur after giving a loan to a home buyer. This policy prevents the lender from getting into a property dispute that they inherited from the previous owner. Very often, before approving a loan to a buyer, he or she will be asked to buy this along with other types of insurance. In this way, lenders ensure that they do not get into a disadvantageous position as the owner of the property. The amount of costs of this insurance primarily depends on the amount of money that the buyer receives from the lender.
Owner’s title insurance
When it comes to owner’s title insurance, this policy has the primary role of protecting the buyer from damages that would lead to financial losses due to participation in property disputes or the obligation to pay tax debts of the previous owner. The cost of the insurance policy depends on the price of the property.What does title insurance cover?
Title insurance provides protection against various, unfavorable situations in which no new homeowner wants to get caught. These are protection against confiscation of property, lien, encroachments and easements, fraud, and others. Please note that the title insurance policy does not cover those barriers that are present in the public records, but only refers to those problems that can be discovered after the purchase of the real estate by the new owner.
How much does title insurance cost?
Before we go deeper into the topic of price title insurance, it is necessary to emphasize once again that price is definitely not something that should be a limiting factor for you here. Avoiding buying a title policy may seem like a good way to save money, but many people end up finding out that this was a big mistake. Lack of protection against financial losses due to the transfer of ownership to you can require a lot of your money, time, energy and be a huge source of stress in undesirable situations.
As for the price of insurance, it generally varies depending on the location and differs from country to country. When it comes to owner’s title insurance, we mentioned that the amount of costs depends on the price of the house. Its price is usually up to 1% of the total value of the real estate, which is usually up to several thousand dollars.
You can find calculators on the Internet that can help you calculate the approximate price of title insurance, but this is not accurate enough. It would be best to contact the insurance agency you are considering hiring and ask them to send you their estimate to purchase a title insurance policy for the area in which you live.
Although title insurance is not as popular as other types of insurance, it is likely that this will change in the future, as more and more people will realize its importance. Title insurance protects new homeowners from unfavorable situations in which they would find themselves due to the signing of ownership contracts, such as: participation in property disputes, repayment of tax debts, etc. There are two types of title insurance: lender’s and owner’s title insurance. Their prices differ, as they depend on different factors. We suggest that you do not try to save money by avoiding buying title insurance, as this could cost you dearly in the long run.