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What’s the difference between Owner’s Title Insurance and Lender’s Title Insurance?

Getting title insurance for your Maine home is important, but if you’ve talked much with your real estate agent about what’s required, you may have heard both owner’s title insurance and lender’s title insurance mentioned. It’s true that there are two different policies, but many buyers wonder why it’s necessary to have both. The reason is because of the way the policies are structured, how long they last, what they cover, and who they protect. As their names indicate, the owner’s title insurance protects the buyer, and the lender’s title insurance protects the bank or mortgage company.

There are more differences than just who is protected, though. The buyer’s (owner’s) title insurance policy protects only the buyer, and is in force for as long as the buyer owns the house. Whether they sell it six months later or own it for 60 years, the same title policy will protect them and cover them if there’s a claim made against the title. The lender’s policy protects only the lender, and is based on the total dollar amount of the loan. As the mortgage is paid down, the amount of coverage the title policy offers is also reduced. Once the mortgage is paid off, the policy disappears.

A lender’s title insurance policy disappears after the payoff of the mortgage because it is no longer needed, and because the mortgage company no longer has any interest in the property at that point. Both policies protect against mistakes in examining records, forgery, undisclosed heirs, and errors or omissions in deeds. There can be other problems that occur with a house, but the problems the policies protect against are the issues that are most likely to arise. By making sure both the buyer and the lender are covered, anyone who has an interest in the real property is protected.

When you buy a Maine home and get a lender to finance it for you, that lender is going to require a title insurance policy that protects their interests. While you may not be required to purchase an owner’s title insurance policy in addition to the policy for your lender, it’s a good idea to get one. They are generally not that expensive, and they will never go away. They also won’t mean a recurring cost, since they are a one-time expense that’s paid for at closing. After you’ve purchased the policy, you’ll have peace of mind, knowing your new home is properly covered.

If you have questions about owner’s and lender’s title insurance policies, your real estate agent may be able to answer them for you. You can also check with the title company to find out how they issue policies, how much those policies cost, and what, specifically, you’re required to purchase. The more you know about title insurance policies, the more comfortable you’ll be when asked to pay for them at closing. Some of the closing costs can be confusing, but don’t be afraid to ask questions. Making sure you understand your real estate transaction, and everything it involves, is important.