By Lydia Blair
When it comes to Texas title insurance, there are two kinds of title policies. Most folks don’t realize it because there are so many figures and fees on their closing documents. It’s easier just to lump the title premiums together and ignore the details.
Loan Title Policy
This is also called a lender’s policy. It protects the lender’s interest in the property until the mortgage is paid off. Lending institutions require this title insurance when issuing a mortgage or refinancing a property.
A Loan Policy covers unrecorded liens, title defects, fraud, encumbrances, access rights, and more. It gives the lender protection to ensure that their mortgage has priority over other liens, and that their lien is valid and enforceable.
A loan policy covers up to the amount of the loan and decreases as the mortgage debt is reduced. The loan policy doesn’t protect the owner’s equity in the property. So, if you purchased a home for $500,000 and financed $300,000 of the price, then the lender’s policy would be for $300,000. If a valid ownership claim was made, the title insurance could cover the lender losses up to $300,000.
In most residential real estate transactions, the homebuyer has additional interest in the property. The second type of title insurance helps protect that buyer’s investment.