What is title insurance and why do I need it?
The first misconception we need to clear up about title insurance is that you not only need it but you will be required to provide it for your mortgage company. Many first time buyers are confused by title insurance and do not understand why their mortgage company is requiring them to pay the premium for title insurance as part of their loan agreement. The reason your mortgage company wants to have title insurance is to protect them, not you, in case you default on the loan and the mortgage company must foreclose on the property.
Sounds a little confusing since the mortgage company has a signed promissory note and a recorded mortgage to protect their interest, right? Let's start by explaining a little more about title insurance to help you understand why it is so important to a mortgage lender.
What is title insurance?
When you purchase property in Massachusetts, a Massachusetts real estate attorney will perform a title examination. A paralegal working for the attorney or on behalf of the attorney (or the attorney himself) will research the information and documents in the public property records to determine the owners of the property for the past 50 to 60 years. He or she will research each owner to ensure that he or she held title to the property and the deeds conveying the property were properly executed. The title exam will also include searching for easements, rights-of ways, restrictive covenants, liens or other encumbrances that attached to the property during the chain of ownership. Each lien must be properly satisfied and canceled in order for the current owner to convey a clear title to the property to the new owner.
Your real estate attorney will review the title examination to ensure that the current owners have fee simple title to the property and have the legal right to transfer their interest to the new owner without any encumbrances or title defects. However, because the mortgage lender wants an added layer of protection against title defects to protect its lien against the property, it requires that a title insurance company issue a title opinion and insurance policy covering the amount of the loan. If the mortgage company must foreclose its mortgage and a subsequent title examination reveals a title defect that was not discovered prior to the current mortgage, the title insurance policy will pay the lender's costs to correct the title problem or pay the mortgage balance in full.
Does the title insurance policy cover my interest?
A title insurance policy does not cover the owner against title defects unless the owner purchases a separate owner's title insurance policy. An owner's policy is very inexpensive compared to the coverage you receive; therefore, it is always advisable that you purchase an owner's title insurance policy when you pay for the title insurance policy for your mortgage lender. While title insurance policies do not cover all circumstances and typically contain some exceptions, it is a wise choice when you are making one of the largest investments of your lifetime.
Stephen R. Manning has years of experience examining titles, assisting parties in correcting title problems and handling real estate closing transactions. Mr. Manning can explain title insurance policies in further detail and give you the pros and cons of investing in an owner's title insurance policy. When you are purchasing real estate, you want an experienced East Longmeadow real estate attorney representing you to ensure that your legal rights are protected. Your home is one of the biggest investments that you will make during your lifetime – – protect your interest from the beginning by hiring an experienced real estate attorney to handle your real estate transaction.
Contact Stephen R. Manning Law Office for more information about our affordable real estate services.
When you are searching for a real estate attorney to handle your commercial or residential real estate transaction, you want an attorney with experience in real estate transactions and knowledge of Massachusetts property laws to give you reliable real estate advice. The Stephen R. Manning Law Office strives to take the stress out of buying or selling commercial and residential real estate by providing support during every step of a real estate transaction.
We serve clients in all counties in Western Massachusetts and on Cape Cod, including, but not limited to the Towns of Agawam, Barnstable, Chatham, Dennis, Hampden, East Longmeadow, Hyannis, Longmeadow, Ludlow, Monson, Palmer, Osterville, Springfield, Wilbraham, Worcester and Yarmouth. Our office is conveniently located at 200 North Main Street Suite 2, East Longmeadow, Massachusetts 01028. Call us today at (413) 525-1119 so we can help you with your real estate needs.