Refinancing is a process where your old mortgage is ‘paid off’, and a new mortgage is put into place. There are a variety of reasons why you may consider refinancing (and that just may be a topic for another article), but when you do, you’re facing a lot of the same paperwork and players as the first go round – minus a Realtor, of course, as property isn’t actually changing hands.
You may be thinking, ‘well, at least ownership isn’t changing. I don’t have to worry about Title this go-round!’
You’d be right – AND wrong.
Let me tell you what I mean. Title policies come in two shapes and sizes, and they both have similar purposes; protection. One protects you and the other protects your lender.
And as you may well remember, your title insurance policy is valid for as long as you own the home -whether or not you have a mortgage on the home. That means as far as you’re concerned – you’re still covered.
But that same level of coverage doesn’t extend to the lender. Once the mortgage is paid off, the lenders policy expires. And when a new mortgage is put into place (which is what is essentially what is happening when you refinance our home), the lender requires a new title insurance policy.
That’s because the policy that you still hold doesn’t insure the new mortgage that you’re creating when you refinance, and it doesn’t cover events, judgments, or liens that may have occurred since the time the original policies were initiated.
The fact is this: every time a new mortgage is initiated, a new title insurance policy is needed by the lender to insure the validity of the mortgage. Plain and simple.
Questions? We love questions – especially about Title. We’re experts, you know. Ask away.