When purchasing a home, title insurance protects the buyer from financial losses should a covered claim arise with regards to the title. Once the title is worked and cleared you can proceed to closing on the purchase of your new home with peace of mind. When you are refinancing your home, you will need title insurance again, but it is for different reasons than before. Looking to refinance your home? TitleQuest is here to help, let us guide you through the process and teach you all you need to know about refinance title insurance.
What is Title Insurance
There are two main types of title insurance when you purchase a home—the lender’s title insurance and the owner’s title insurance. The owner’s title insurance is what you typically think of when you think of title insurance, and the lender’s title insurance protects the lender.
Lender’s Title Insurance
The lender’s title insurance is based on the amount of your loan. Once the loan has been paid in full then the policy expires; however, when you take out a new loan (refinance) a new lender’s title insurance will be put in place. The lender’s title insurance is designed to protect the lender, so it does not protect the owner against any title issues.
When you refinance or purchase a home, your lender will want to ensure that their investment is protected from title defects and issues. That is why lenders require lender’s title insurance when refinancing.
Owner’s Title Insurance
The owner’s title insurance policy is purchased when you are closing on your home. This policy remains in effect the length of time you are the owner of the property. This insurance is designed to protect the owner against any title issues. Therefore, when you refinance your home, you don’t have to purchase owner’s title insurance again.
Why is Lender’s Title Insurance Required?
Now, you may be wondering—why do I need to have refinance title insurance if I am already covered for title problems under my owner’s policy? The reason for this is that when you refinance your home, you are required to insure the Deed of Trust (DOT). A new DOT is issued on each new mortgage loan (which occurs when you refinance). Because you are acquiring a new DOT, they need to ensure that they are protected, so you are required to purchase refinance title insurance.
Why do the lenders require this? The reason is that the lender needs to verify that you are the property owner and that there are no existing liens on the property. A lender won’t fund your refinance without it.
Lender’s Title Insurance in Virginia Beach
Are you looking to refinance your home in the Hampton Roads area—Virginia Beach, Chesapeake, or Norfolk? TitleQuest is here to help. We are a title company with multiple locations across the Hampton Roads area. We have helped thousands of people just like you refinance their home and purchase refinance title insurance, let us help you too! Call one of our offices today or visit our website for more information.