At closing on a new home loan, you may see paperwork concerning title insurance for the lender. This insurance protects the lender against the validity of the mortgage and secures their investment. You may think that this protects you, as the mortgage holder, but it does not. There are several reasons that a newly built home needs title insurance – chiefly, to protect you, the homeowner.
You might not be the first owner
Even though your home is new construction, and you purchased the lot for the house, you may not be the first owner of the property. In fact, your plot may be a parcel of larger acreage, one that has changed hands several times before being developed. Title insurance guards you, the homeowner, against liens against the land itself. The title search conducted as part of your insurance appraisal will determine the validity of your purchase, as well as the legal ability of the seller to sell to you. The survey of your property will legally establish the boundaries of your ownership.
The builder may owe money on your house
http://heightstitle.com/wp-content/uploads/2018/01/home-needs-title-insurance.jpgIf a builder hasn’t paid their suppliers or vendors, these companies may place a lien against the physical structures. This lien, while against the builder of your house, is still placed on your home. While you may have purchased the home from the builder in good faith, a lien on your property will affect your ability to sell your home in the future.
Mechanic’s liens against your property come from companies such as roofers, electricians, and plumbers. These actually attach to the real estate itself, rather than the builder’s company. When you sell your house in the future, or your heirs do, if these subcontractors haven’t been paid by the builder, it’s your own house that has the unresolved debt attached.
Owner ‘s Title Insurance protects your home forever
While the lender may purchase a Lender’s Policy, that only protects their loan. The coverage for the policy drops as the amount of the loan decreases. A home owner’s title insurance policy, however, is in place for the entire duration of your home ownership, and the coverage won’t decrease unless you personally make changes to the terms of the policy. The bank’s title insurance protects their loan only.
Your personal title insurance will identify any risks before a transaction on your property is completed, and if a claim is discovered, the insurance policy should cover it, along with any court costs and fees.
Options for enhanced insurance
At the time of closing, you’ll pay a one-time premium for your title insurance. You may opt for standard coverage, which protects your house against mechanics liens and the like, as well as your investment. You may also have an option (this varies by state) to purchase enhanced coverage. This protects against undiscovered encumbrances, such as zoning issues, fencing disputes, and even mineral rights. It even protects you, the homeowner, from building permit violations created by your home builder (please note – this doesn’t cover any DIY projects that you complete on the home).
Purchasing title insurance on a newly built home is an added level of protection for one of your most valuable investments. Call Heights Title Services and speak with our team for recommendations. Investing in protection now may save you a lot of headaches in the future.