Title Insurance When Refinancing Your Loan

Lower interest rates have motivated you to refinance your home loan. The lower rate may save you a tremendous amount of money over the life of the loan, but you should also expect to pay the lender the typical closing costs associated with any new loan, including service fees, points, title insurance protection and other expenses.

Why New Title Insurance is Needed

The Lender's Perspective

To the lender, a refinance loan is no different than any other home loan. Your lender will want to ensure their new loan is protected by title insurance, just as the original lender required.

What You're Buying

When you refinance, you are buying a title policy to protect your lender. This is different from your original purchase, where you may have bought both an owner's policy and a lender's policy.

Understanding Lender's Need for Title Insurance

Most lenders generate loans and then immediately sell those loans to secondary market investors, such as FannieMae. These investors require title insurance to protect their security interest. Even lenders who keep loans in their portfolio typically require title insurance for protection against title-related defects.

Previous Title Insurance Considerations

What About My Original Policy?

• Your original owner's policy stays in force as long as you or your heirs own the home
• The original lender's policy expires when you pay off the loan
• A new lender's policy is needed to protect the new lender's interest

Potential Title Issues Since Purchase

Several title defects could have occurred since your original loan:

• Second trust deeds
• Mechanic's liens
• Child support liens
• Legal judgments
• Tax liens

Even if it has been only 6 months since you purchased or refinanced your home, these issues could have arisen. The only way for a lender to adequately protect itself is to get a new lender's policy each time you refinance.

Available Discounts

Title companies often offer special rates for title insurance on refinance transactions:

• Refinance transaction discount
• Short-term rate
• Possible discounts for using the same lender
• Ask your title company about available savings

Key Points to Remember

1. New Policy Requirement

   • Required for each new loan
   • Protects lender's new security interest

2. Owner's Policy

   • Remains in effect
   • No need to purchase new one

3. Timeframe Irrelevant

   • New liens can arise quickly
   • Recent purchase doesn't eliminate need

4. Cost Savings

   • Special refinance rates available
   • Multiple discount options possible