When you buy a home, you know that your down payment is just the beginning of what you must expect to pay on closing day. There are also a variety of closing costs associated with your purchase. Some of these fees are just the cost of doing business. But others offer a little wiggle room—if you know how to find it.
Title insurance is one of those closing costs where you could save big money if you know how.
Here’s a beginner’s guide to title insurance, including what it is, why it’s important, and how to save money on it.
What is Title Insurance?
Title insurance protects against loss or damage resulting from defects that affect the title to your home or place of business.
Need that sentence again in layman’s terms? If there are legal claims against the home you are buying, title insurance gives your lender and you, the new owner, financial protection against them. Your lender will have a title agency check for any open claims against the home you are buying. But if unseen issues pop up after your purchase, without title insurance you could be on the hook for big money.
Why is Title Insurance Important?
Title insurance protects the investment you’ve made in your home or place of business. When you buy property, the previous owner conveys the title to you to evidence your full legal ownership. Occasionally, a hidden defect in the title or a mistake in a prior deed, will, or mortgage may give someone else a legal claim against your property. Such defects could include:
- Mistakes in examining records.
- Errors or omissions in deeds.
- Liens for unpaid taxes.
- Liens by contractors.
- Forged signatures.
- Undisclosed heirs.
- Missing heirs.
If a claim is made against your property, title insurance can save you time and money by:
- Providing a corporate guarantee against insured defects.
- Covering all legal expenses to eliminate any title defects.
- Paying any claim arising from errors in title examination and recording.
- Paying any loss arising from hidden defects in title and defects not of record.
Your title insurance protection is a permanent assurance that your ownership and use will be defended promptly against claims, at no cost to you, whether or not the claim is valid.
Editor’s Note: Title insurance does NOT cover damage to your home or neglect from deferred maintenance and repairs. You will need to purchase a separate homeowners insurance policy in order to protect your home from physical issues, like accidents or natural disasters.
How Can You Save on Title Insurance?
On average, title insurance is a one-time cost of anywhere from $1,000 to $2,500.
Like other forms of insurance, with title insurance, you get what you pay for. However, it’s also important as a new homeowner to be sure that you’re not paying more than you need to for this service. Here are six ways to be sure that you’re not paying too much for your title insurance:
Different title insurance companies charge different rates and fees for different services performed (though, prices are locked in some states). The best way to know that you’re getting the best coverage for the best price is to compare quotes. When you do, be sure to compare bottom-line prices, checking that each quote includes identical services. But if you’re going this route, be sure to move quickly—It takes time for these firms to research and prepare documents. And the last thing you want is to lose money in a delayed closing because you were trying to save a few dollars elsewhere.
Negotiate Your Add-on Fees
Even in states where title insurance prices are regulated, companies can tack on extra fees as part of the transaction. Add-on expenses could include mail and courier charges, copy fees, costs for searches and certificates, premiums, and closing fees. According to Bankrate.com, “Experts say you often can reduce these costs simply by calling the title insurance company and asking to have some of the fees removed. If the insurer balks, you can always look for another provider.”
Ask for the “Simultaneous Issue Rate”
It’s in your best interest to purchase title insurance to protect yourself. It’s in your mortgage lender’s best interest to require a separate insurance policy issued in their name. But it’s your responsibility to pay for both. If you “bundle” them together, you can almost always save money. Just like the commercials tell you.
Check for Discounts from Your Lender
Whether you’re buying a new home or refinancing your current one, it’s possible that your lender will offer a discount on your closing costs. Some local banks and credit unions may offer loyalty discounts to existing customers. Or you may be able to ask for a credit toward your closing costs in exchange for a slightly higher interest rate. If you’re committed to saving on your up-front costs, make a point to shop around for your lender, as well.
Find out if You Qualify for a Reissue Rate
Wouldn’t it be great if you could just piggyback on the seller’s title insurance policy? It’s possible that you can. In fact, about 65% of all title policies qualify for reissue rates. Ask your closing attorney if they can locate a previous policy issued for the property within the last 15 years. If so, you could be eligible for a reissue rate credit for a discount of 5%–60% off the premium. (This also applies to home refinancing.) Depending on your lender, they could keep this a closely guarded secret. So be sure to ask for reissue rates, because your lender might not bring them up.
Ask for the Seller to Pay
Of course, the absolute best way to save money on your title insurance is to have someone else pay it. In a strong seller’s market like we’re seeing now, it’s unlikely for the seller to agree to that. However, if a property has been on the market for some time and the seller is anxious to complete the purchase, they may be open to negotiation. Asking the seller to cover some of your closing costs, whether it be title insurance or attorney fees, etc., is a reasonable request. But if you go this route, especially if you’re asking for other concessions, be prepared to cover the costs if the seller refuses.
Why Choose Cardinal Title Center?
You deserve the best title insurance available. And in Western North Carolina, that’s Cardinal Title Center, LLC.
Cardinal Title Center is located in Brevard, NC, and serves clients statewide. As locals ourselves, this enables us to add value to your closing process through full understanding of local mortgage and title requirements. We streamline your transaction and overcome any issues before they become obstacles to your closing.
Ready to get started? Visit cardinaltitlecenter.com today!