Why do buyers have to pay for two title policies on a home?

On Behalf of | Feb 3, 2022 | Residential Real Estate

Real estate in New York often comes with a significant price tag. Even properties in mediocre condition can command a premium price because of their locations. You may have to push to the very edge of your budget to make a successful offer on a home.

Unfortunately, that might mean that you have a hard time covering all of the closing costs you incur in addition to the price of the house itself. Closing costs frequently add thousands of dollars to the total price for a real estate transaction.

When you go over the settlement statement that outlines what’s the money from your mortgage will pay, you may notice that there are two different title charges. Why do you have to pay premiums for two separate title insurance policies? 

You aren’t the only one with something to lose

A title insurance policy protects you from financial losses due to someone having an ownership claim to the property that you intend to purchase. If someone with a potentially valid claim to the property wants to take you to court, your title insurance policy can pay for an attorney or reimburse you for any lost investment you have made in the property.

In the event of a successful title claim, you won’t be the only one who loses money. The lender who provided the mortgage that financed the purchase could also lose hundreds of thousands of dollars. You have to pay for title insurance to protect yourself and your investments in the property, although you may have the option of waiving that coverage.

However, you do not have the option of refusing to pay for a lender’s policy. It is a necessary cost for a home purchase involving a mortgage.

Making sense of closing documents isn’t easy

You want to make sure that you adequately protect yourself when buying a house. Keeping costs low is only one concern. Actually understanding the commitments we make and the terms in your mortgage paperwork will protect you from overextending yourself.

Learning about the obligations you must have filled and the protections extended to you during the home purchase process will make a residential real estate transaction easier.