Today we are breaking down the difference between owner's title insurance and lender's title insurance to give you a better understanding of what each policy covers and why each type of policy is crucial to your real estate closing.
Owner's title insurance and lender's title insurance are two different types of insurance policies that protect different parties involved in a real estate transaction.
Owner's Title Insurance
Owner's title insurance is purchased by the homebuyer to protect their investment in the property. Owner's title insurance provides coverage for potential losses or damages resulting from title defects, liens, or other issues that may arise with the property's title. These issues could include undisclosed heirs, errors in public records, fraud, forgery, or other claims against the property. Owner's title insurance typically remains in effect for as long as the owner or their heirs have an interest in the property.
Lender's Title Insurance
When a buyer obtains a mortgage or loan to purchase a property, the lender typically requires lender's title insurance. This insurance policy protects the lender's investment in the property by ensuring that their mortgage or lien is valid and that there are no existing liens or claims that could jeopardize their position as a secured creditor. If an issue arises with the title that affects the lender's interest in the property, the lender's title insurance policy will cover the lender's losses up to the loan amount.
It is important to note that the lender's title insurance policy does not provide any protection for the homeowner's equity or investment in the property which is why it is important that the homebuyer invests in an owner's title insurance policy.
In summary, owner's title insurance protects the homeowner's interest in the property and covers a wide range of potential title-related issues, while lender's title insurance protects the lender's financial interest in the property and focuses on ensuring the validity of their mortgage or lien. Both types of insurance are obtained during the closing process of a real estate transaction to mitigate the risks associated with title defects or claims. Another reason why it is important you do your due diligence and work with a title company that understands your needs.
Still have questions on the title insurance process? Contact one of our escrow experts to learn more about the process and answer any questions you may have about coverage. Rest assured that with Willow Bend Title Company by your side, you and your mortgage lender will be fully protected even after closing day.