What is it?
Buying a house is an exciting time and the more you know about the process, the more relaxed you’ll be going through it. Lifetime Television did a great job explaining the closing process and how purchasing an Owner’s Title Insurance Policy will give you peace of mind that your investment is protected. Click here to watch the video.
Typically, when purchasing a home in New York State, the prospective homeowner will obtain title insurance. Title insurance is necessary to protect you, as the owner of the property, and your mortgage lender, if any, against any defects in the title to the property which are of record with the county clerk at the time of sale.
Prior to the closing of a purchase or refinance of real property, a title search will be performed. A title search is a detailed examination of the county’s property records.
The title search will discover any defects in the title such as judgments, liens, unpaid real property taxes or other encumbrances recorded or filed against the property. The search for these items will prevent a prospective purchaser from purchasing the property when another person or entity not involved in the transaction has an interest in the property. These encumbrances will need to be resolved prior to the closing so that the new owner can enjoy the property knowing his or her interest in same is secure.
Owner’s policy- An owner’s policy will protect the property owner up to the full original sales price of the property. An optional market value endorsement can be purchased with the owner’s policy at the time of closing. With said endorsement, the amount of the insurance will increase as the value of the property appreciates. This endorsement does not include any increase in value resulting from improvements made to the home. In that instance, additional insurance would need to be obtained.
Lender’s Policy- A lender’s policy protects the lender’s interest in the property up to the amount of the loan.
Rates - Title insurance rates and rules are regulated by the New York State Insurance Department.
Usually, the purchaser will be responsible to pay for both the owner’s policy and lender’s policy. In certain situations, the purchaser will be entitled to a discount in the premium as follows:
Simultaneous Mortgage Issue- When Owners and Mortgage policies are issued at the same closing, a reduced rate known as the Simultaneous Mortgage Rate applies. The Owners policy is charged the full Owners rate and the Mortgage Loan policy is charged 30% of the applicable Mortgage Loan rate.
Refinance/Subordinate Mortgage- A discounted premium is applicable for a Mortgage Loan policy issued at the time of a refinancing, when issued within ten years of a previously insured mortgage or fee policy, and there has been no change in ownership and the property has not changed.