Title Insurance and Refinancing Your Home
Published on Saturday, 11 June 2011 11:03 Written by Lawrence D. Brudy & Associates, Inc.
As mortgage interest rates decline at an increasing rate, consumers are beginning to think about refinancing their current mortgages. In Pennsylvania, the consumer has the right to choose the title insurance agency to conduct the title search and issue the title insurance policy protecting the lender.
Title insurance provides protection against problems that may arise from property you purchased. Title insurance protects against defects in the chain of title that have already occurred.
When a property is sold or refinanced, a title search is conducted of relevant public records to determine that there are no liens, taxes and judgments outstanding against the property and owner(s) that would jeopardize the lender’s lien position in title. A title search should also reveal any rights of way and easements (access, utility-water/sewer/electric, lease-oil/gas/coal) as far back as 150 years.
Title insurance agents gather, review and interpret this information resulting in a “commitment to insure” which is provided to the lender and to you. The commitment to insure provides the basis for the lender’s title insurance policy. Title insurance rates are regulated and promulgated by the Pennsylvania Insurance Department. Consumers are entitled to reduced rates if a title insurance policy has been issued in the past.
For example, a consumer borrowing $100,000 for the first time on a property would pay the “basic” filed rate for title insurance of $858.75. If the refinance (of the same property) takes place within 10 years, the title insurance premium would be reduced by 10% to the “reissue” rate of $772.88. If the refinance takes place within the 3rd or 4th year, the reduced “substitution” rate is 80% of the reissue rate or $618.80. Finally, if the refinance occurs within two years, the reduced substitution rate is 70% of the reissue rate of $541.01.
As a general rule, lenders require a title insurance policy as a condition of a refinance. Title insurance policies are not transferrable and many consumers are unsure as to the issuance of a previous policy insuring their purchase (owner’s policy) and/or mortgage (lender’s policy). In Pennsylvania, it is customary on purchases that title agents issue simultaneous owner’s and lender’s policies. The owner’s policy is created from the previously issued commitment to insure with the additional recording information on the Deed. The owner’s policy should be mailed with the original recorded Deed to the purchaser. These documents should be kept with a copy of the purchaser’s closing papers. (Now in many cases, provided on a computer disk.) The date of the Deed or previous mortgage can be used as a point of demarcation to determine which title insurance policy premium they should expect to pay in tandem with their refinance.
Contact any of the firm's attorneys at (724) 935-1400 for more information. Use our contact form to send us a message.