You’ve finally found the perfect home and now decided that you want to purchase it. In order to buy a house, you will need a mortgage. When getting a mortgage, your lender may be insisting that you take out title insurance. Title insurance itself can be complicated, especially when trying to choose between the two different types of policies. One title insurance protects the lender, while the other protects the homebuyer. When purchasing a house and taking out a mortgage, it is important to know and understand the differences between the two.

What is title insurance?

Title insurance protects the insured from defects in a home’s title that can affect the insured person’s ownership in the property. Having title insurance can help protect you and your property from potential claims and previous title deficits. When a home buyer  makes an offer to purchase a house, the seller will want to ensure that the property’s title is clear. But even the most careful and attentive search of the public records could fail to reveal a number of title errors. Without the protection of title insurance, homeowners can find themselves with a risk of losing their investment. Title insurance compensates against loss if any of these result in a claim against ownership. Knowing both types of title insurances is important when purchasing a residential property. Let’s take a look at the two:

Lender’s Title Insurance

The first type of title insurance we will look at is called a loan policy, or lender’s title insurance.  When finalizing a home loan, mortgage lenders are looking to protect their investment. An easy way to ensure they are protected is by getting insurance in the form of a loan policy. This policy secures its interest in the value of the titled property. The insurance helps the lender to reduce the risk involved with lending money for the purchase of residential or commercial property. A lender’s policy is different from an owner’s policy due to insuring the amount of debt that is secured as opposed to the face value of the policy. Let’s put it this way, if a property was purchased for $250,000 and a down payment of $50,000 was made, the lender’s policy will only protect the lender’s interest in the lesser amount of the mortgage amount, in this case $150,000, or the outstanding amount of debt that is secured at the time of the insurance claim.

Owner’s Title Insurance

While a loan policy protects the lender from risk, it doesn’t protect the homebuyer in any way. When the buyer purchases their own policy, they are then covered, much more than they would be with a lender’s policy. Since both the lender’s and owner’s investments are distinct,  so are the title insurance policies. Going back to our example, with an owner’s policy, instead of being insured for the lesser amount of mortgage, they will be insured for the face value or the total price paid for the home.

Title Insurance Companies in New York

Both owner’s and lender’s title insurance policies are important to protect your property in the event that someone brings a claim against it. At Allegiance Abstract Services, our team of escrow agents, underwriters, and title closers have years of experience aiding clients with NY title search and their real estate transactions. If you are considering purchasing a property, your rights could easily be jeopardized.  Before purchasing a home, it is essential that you protect your upcoming investment with title insurance. At Allegiance Abstract Services, our team can help provide a full range of title insurance products. We’ll handle the entire process, contact Allegiance Abstract Services for New York title insurance.At Allegiance Abstract Services, we can provide a full range of title insurance products. We’ll handle the entire process, contact Allegiance Abstract Services for New York title insurance.