This is a very common question when looking at your closing fees – what is title insurance? Do I really need it? There are a few ways of answering this:
Do you have a mortgage?
- If yes, you are required to get the lender policy at the very minimum.
- The Owners Policy is OPTIONAL, whether you have a mortgage or not.
Lenders Policy: Usually based on the dollar amount of the loan and price of the house, it protects the lender’s interests in the property should a problem with the title arise. It does not protect the buyer. The policy amount decreases each year and eventually disappears as the loan is paid off.
Owners Policy: Also based on the dollar amount of the house, protects the buyer should a covered title problem arise. Possible hidden title problems can include: Errors or omissions in deeds, Mistakes in examining records, Forgery, and Undisclosed heirs. It is a one time fee paid for at closing and will last as long as you have an interest in the property. A real life example would be if repairs were made to a house without a permit and the governing county decided to make you prove the house was up to code, possibly opening up walls, etc. Title insurance will protect you and your wallet.
How much does it cost in Virginia?
Ex. $500,000 sale price, 20% down, Loan Amount of $400,000
- Total Title Insurance Cost: $2,430 ($1,130 for Lender Policy, $1,300 for Owners Policy)
Ex. $1,000,000 sale price, Loan Amount of $625,500
- Total Title Insurance Cost: $4,470 ( $1,690 for Lender Policy, $2,780 for Owners Policy)
Do you want the basic or the enhanced policy? Here’s the best explanation of the difference, as written by Federal Title.
Did you know – if you are selling your house or refinancing your house and your title insurance policy is LESS THAN 10 years old you can qualify for a REISSUE rate which will save you a substantial amount of money or your buyers.
If you still have questions, please read this blog by my friend, Wade, who works for Stewart Title – the #4 largest issuer of title insurance.