Lender’s title insurance and owner’s title insurance are two types of insurance policies that protect different parties in a real estate transaction. Here are the main differences between them:
Purpose
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- Lender’s Title Insurance: This type of insurance protects the lender (such as a mortgage company or a bank) against any title defects or issues that may arise with the property’s ownership rights. It ensures that the lender’s lien or mortgage on the property is valid and enforceable.
- Owner’s Title Insurance: This type of insurance protects the property owner against any title defects or issues that may arise with the property’s ownership rights. It provides coverage for the homeowner’s equity in the property and protects their investment.
Coverage
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- Lender’s Title Insurance: The coverage provided by lender’s title insurance is typically limited to the amount of the loan or mortgage. It focuses on the lender’s interest in the property and protects their financial investment.
- Owner’s Title Insurance: The coverage provided by owner’s title insurance is typically equal to the purchase price of the property. It covers the property owner for the full value of the property and protects their ownership rights.
Cost
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- Lender’s Title Insurance: The cost of lender’s title insurance is typically paid by the borrower as part of the closing costs. The premium is usually based on the loan amount.
- Owner’s Title Insurance: The cost of owner’s title insurance is typically paid by the property owner at the time of purchase. The premium is usually based on the purchase price of the property.
Duration of Coverage
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- Lender’s Title Insurance: The coverage provided by lender’s title insurance is valid for the duration of the loan. Once the loan is paid off or refinanced, the lender’s title insurance policy terminates.
- Owner’s Title Insurance: The coverage provided by owner’s title insurance is typically valid for as long as the property owner or their heirs have an interest in the property. It provides protection against covered title defects that occurred before the policy’s effective date.
Beneficiary
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- Lender’s Title Insurance: The beneficiary of lender’s title insurance is the lender or mortgage company.
- Owner’s Title Insurance: The beneficiary of owner’s title insurance is the property owner.
It’s important to note that both lender’s title insurance and owner’s title insurance are typically recommended in real estate transactions. Lender’s title insurance protects the lender’s interest in the property, while owner’s title insurance protects the property owner’s investment and ownership rights.