Good Day everyone, great info on why lenders require Title for your refi. Make it a great day!!
Lower interest rates have motivated you to
refinance your home loan. The lower rate may
save you a tremendous amount of money over
the life of the loan, but you should also expect
to pay the lender the typical closing costs
associated with any new loan, including
service fees, points, title insurance protection
and other expenses.
Why do I need to purchase a new title insurance policy on a refinanced loan?
To the lender, a refinance loan is no different
than any other home loan. So, your lender will
want to insure that its new loan is protected by
title insurance, just as the original lender
required. Therefore, when you refinance you
are buying a title policy to protect your lender.
Why does a Lender need title insurance?
Most lenders generate loans and then
immediately sell those loans to secondary
market investors, such as FannieMae.
FannieMae, in order to protect its security
interest in the loan, requires title insurance
coverage. Even those lenders who keep
original loans in their portfolio are wise to get
a lender's policy to protect its investment
against title related defects.
When I purchased my home, didn't I also buy a lender's policy?
Perhaps. Who pays for the lender's policy on a
purchase loan varies regionally and by the
terms of individual contracts. However, even if
you did buy a lender's policy when you
purchased your home, the lender's policy
remains in force only during the life of the loan
that was insured. If you refinance, the old loan
is paid off ( the "life" of the loan expires) and a
new loan is issued for with the lender will
require a new title insurance policy.
What about my original title insurance policy
When you bought your home, you purchased a
homeowner's title policy. The homeowner's policy
stays in force as long as you or your heirs own the
home. When you refinance, your lender will often
require that you purchase a new lender's policy to
protect its new security interest in the property.
Thus, you are buying a policy to protect your
lender, not a new homeowner's policy.
What could possibly have happened since I purchased my home which warrants a new lender's policy?
Since the time that the original loan was made, you
may have taken out a second trust deed on the
house or had mechanic's liens, child support liens
or legal judgments recorded against you - events
that could result in serious financial losses to an
unprotected lender. Regardless if it has been only
6 months or less since you purchased or refinanced
your home, a myriad of title defects could have
occurred. While you may not have any title
defects, many homeowners do. The only way for a
lender to adequately protect itself is to get a new
lender's policy each time you purchase or
refinance your home.
Consumer's Title & Escrow has what is called a Choice Rate which is Title & Escrow combined.
This rate applies to refinances only and is one of the lowest rates in California. You may call our Escrow officer Debra Lasater at 805.495.7200 for more details.
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