Title insurance needed during refinancing?

Question

Hello,

I recently got started shopping around for refinance and the lender fees is very hefty and one of the fees they are including is the title fees, will I need to pay title fees again? even if I hold title insurance during my previous purchase? How much in title fees should I expect during Refinancing.Appreciate your inputs.

Thanks

Peter Walther · Answer

Here is a random link to a title agent in Texas to helps calculate the refinance rate for a new title policy.

https://independencetitle.com/houston/refinance-premium-calculator/

Here is a link to a random title agent in Florida that shows they give a re-issue credit when you have an existing owner's title policy.

https://www.benefittitle.com/refinance-calculator

I believe most states have the same credit.

Kyle J. · Answer

Regarding your first question, it's a lender requirement (not the law).  The new policy is required because any number of things could have happened since the time of the last title search. Things like tax liens, liens for unpaid child support, mechanic’s liens, etc. You may feel nothing has changed since you originally purchased the property, but the lender will want to have the assurance from the title company (in the form of a lender's title policy) that their new loan is fully protected (and it is a NEW loan).

Regarding your second question, unlike with the lender's title policy, you actually do NOT need a new owner's title policy.  You're still going to be the owner after the refinance, and the original owner’s title insurance policy protects your ownership rights for as long as you own your property.

Lastly, as I mentioned in my previous post, although you usually can't avoid closing costs, a lender's title policy, appraisal, etc, you CAN avoid YOU being the one to have to pay for these things.  The way to do that is to use a lender who is willing to pay for these things.

I literally just did almost the exact same thing you're trying to do (I refinanced from 3.625% to 2.5%) and in doing so I paid NOTHING for closing costs, the lender's title policy, etc.  The lender paid for all of that.

I'm not trying to promote a particular lender as there really wasn't anything special about the one I used.  I could easy find three right now who will do the same thing for me (in fact this isn't the only lender I've used that has done this for me).

Point is, shop around and you won't have to worry about paying for all these unnecessary fees.

David M. · Answer

@Kumar Gaurav

The lender requires it.  Title Insurance is basically the Title's company's guarantee that you have Title free and clear.  Otherwise, if somebody comes up with a claim against your Title, you bear the costs of defending it and possibly even losing.  For a relatively small premium, why wouldn't a lender want that assurance?

Yes, the borrower's portion of the Title Insurance should also be void --- double check with the Title company, etc...  Remember, you have just "done" something to your chain of Title by doing the refinance.  The lender isn't "changing" your current loan to 2.5%.  They are giving you a new loan and simultaneously using those funds to payoff the current loan.  So, the old lien has to be discharged and recorded, and a new Note/Mortgage and lien has to be recorded.  Meanwhile, the insurance policy should only be good up to when it was issued so to speak.  It can't insure you "forever."

If the points and lender's fees are that high, you may want to shop around.  Are you using a large, national bank?  Their rates are high.

Good luck.

Tom Gimer · Answer

@Kumar Gaurav No, the owners title insurance policy does not become void when the owner refinances. That policy remains in effect for as long as the insured owns the property.

Regarding obtaining a reduced premium on the lenders policy required by the new lender, this depends on the jurisdiction. Research “reissue rate” or “refinance rate” title insurance. Savings of 30-40% is customary when the borrower meets the requirements.

Kumar Gaurav · Answer

@David M.

Thank you so much everyone for the excellent answers.

Kumar Gaurav · Answer

@David M.

Thank you and it makes sense but I have couple of questions.

#1 Is it mandatory or required by law to purchase a title insurance  or is it just a stringent requirement by the lender to process the loan?

#2 Since you mentioned the previous lender's title insurance becomes void does that mean borrower's title insurance which was bought from the same company also becomes' void?

I currently have a a pretty good mortgage  rate at 3.5 and aiming to lower the rate to 2.5 and the points and lender fees are making it unattractive I am just trying to see if there is a way out to bypass lender title insurance,

I

David M. · Answer

@Kumar Gaurav

Since anything could have happened to your chain of Title, a new search is required and a new policy.  Also, the lender’s Title Insurance Policy is probably writtenfor the one loan.  Now comes another loan which extinguishes the old loan which makes the associated policy void.

Also remember that you may know correctly that you haven’t encumbered your property between loans, but nobody else knows that...

Jim Spatzenfeld · Answer

Similar to what Peter just mentioned, I heard that you can get a reduced fee on title insurance if you go to the same insurance as on your purchase. I have never tried it, so I cannot say if that really works. Also not sure if the lender has the right to pick the insurer or the borrower. Ask your lawyer or escrow company.

I refinanced some properties multiple times, I know it sucks to pay for the same thing over and over. A lot of businesses get rich off refinances.

Ganessan P. · Answer

@Kumar Gaurav - Yes, you have buy fresh new title insurance and you cannot leverage the one from the previous financing/lender. Also, if you go back to the same company i have not seen any significant savings.

Scott Wolf · Answer

Who was the lender?  I've never heard of a lender paying for anything!

Title insurance needed during refinancing?

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