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Robert J. Mather & Associates
98 East Grove Street
Middleboro, Massachusetts 02346
Phone: (508) 946-0066
Fax: (508) 946-4474
Web Site: RJMATHERLAW.COM
What is Title Insurance?
In Massachusetts, the attorney who represents the bank is required by law to search the title at the Registry of Deeds to the property which, is being mortgaged and to certify that the Buyer has a good, clear, record and marketable title. The Buyer must pay the legal fees for the title examination and certification. The bank will also require that the Buyer purchase title insurance from an approved title insurance company to insure its mortgage. This is known as Lender's Title Insurance. The Buyer must pay the premium even though the policy benefits only the bank. However, at the loan closing, the Buyer will be given the opportunity to purchase Owner's Title Insurance, which does benefit the Buyer. This is purely optional and there will be an additional fee, which depends on the amount of the sale price and the mortgage. In deciding whether or not to buy Owner's Title Insurance, many questions are raised, including the following:
| Question: |
Since the attorney must certify the title to me, why would I also want title insurance? |
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| Answer: |
The attorney's certification is based only on the record title for the last 50 years. If a problem does not appear on the record or appears beyond the 50 year period, then the attorney is not responsible. The attorney is also not responsible for fraudulent or forged documents appearing on the record. Title insurance guarantees that the title is good both on and off the record, is not limited to a 50 year period, and does protect against fraud and forgeries. |
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| Question: |
What is the likelihood of there being a title problem that is not covered by the attorney's certification? |
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| Answer: |
The likelihood is not great, but the financial ramifications could be devastating. It is very expensive and time consuming to go to Land Court to cure even simple title problems, and since problems are normally discovered at the time of a proposed sale, it will probably result in the loss of the sale. |
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| Question: |
What does title insurance do if a title problem is discovered? |
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| Answer: |
The insurance company, upon notification of the problem, will first attempt to cure the problem at no cost to the policyholder. If a financial claim is held to be valid against the property, the company will pay the claim. If the title problem is discovered at the time that you are either refinancing or selling your property, and since the policy guarantees the marketability of the property, the company will generally agree to issue a policy to the mortgagee or the Buyer, so as to allow the refinance or sale to occur. |
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| Question: |
Can I buy title insurance from my local insurance agent for less money? |
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| Answer: |
No, title insurance can only be purchased from an attorney who is approved by a company as an agent, and the premium rates are set by the company and not the agent. |
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| Question: |
How much does Owners Title Insurance cost? |
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| Answer: |
It depends on the amount of the sale price and the mortgage. For example, if the sale price is $150,000.00 and the mortgage is $135,000.00, based on current rates, the cost of the required Lenders Policy is $337.50. An Owners Policy may be purchased for an additional premium of $212.50. As the value of the property and the amount of the mortgage increases, so does the premium. The premium for title insurance is not an annual premium, but is a one time cost. |
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| Question: |
Can I buy title insurance at a later date? |
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| Answer: |
Yes, but it will be more expensive because you will have to pay any attorney to certify the title, and you will not get the benefit of a reduced premium because of the simultaneous purchase of Owners and Lenders Title Insurance. In the example of a cost given above, if you were to purchase title insurance at a later date, the cost would be as follows:
As you can see, since the cost at the time of the loan transaction was $212.50, the savings are great. |
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| Question: |
If I buy title insurance for the value of my home, what happens if the property increases in value? |
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| Answer: |
Title Insurance has a built-in inflation rider that increases the amount of the policy as the property normally appreciates up to a limit of 150% of the original amount. This is another important benefit of title insurance because an attorney's certification is limited by statute to the sale price and never increases. |
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| Question: |
How long is title insurance good for and do I have to pay again if I refinance in the future? |
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| Answer: |
Owners Title Insurance is in effect for as long as you own the property. Refinancing the mortgage has no effect. Lenders Insurance only covers a particular loan and a new policy would have to be purchased for a new mortgage. |
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