Purchasing property is essentially a transaction between a seller and a buyer, and a title escrow company helps make this process efficient. These days completing real estate transactions are not as simple as paying cash and being handed the rights to the land or house. There exists the need for a lender in almost all cases.
When property ownership is questioned, a lenders title insurance policy protects the interests of mortgage lender who provide loans to borrowers in exchange for their agreement to follow the contract of the mortgage. Normally speaking, when a mortgage is signed, the borrowing party that has secured it agrees to payment terms that include an interest rate payable for a predetermined number of years.
Mortgage lenders don’t usually own the property they provide loans for to borrowers. Instead, they take the risk of lending money to a third party in order to get paid back with interest, providing them the benefit of payments that exceed the money they put out for the mortgage loan.
However, this doesn’t always work out in their favor. Sometimes, the borrower may just make delinquent payments on a consistent basis, or refuse to pay all together. There could also be problems with the title itself. When this happens, the mortgage lender is put in a tight spot — that is to say, unless that person or company has acquired a lender’s policy. A proper title insurance policy will protect the lender from defaults and other issues.
Protecting the Lender
A lenders title insurance policy protects the best interest of the loaner. Just like a borrower’s policy gives rights to the borrower, the loaner’s policy protects the interest of the lender and covers the property up to the exact amount of the loan. This gives the loaner rights to his fair share of the investment that he or she places in the property along with the borrower.
Certain problems can arise sometimes. Some of these include the possibility that the title does not clearly belong with the mortgage loan borrower, or that the title is subject to defects in accuracy, liens, or financial or legal encumbrances. These sorts of things become tricky issues without proper insurance. The title insurance gives each party the peace of mind and financial security they need to proceed with a loan.
Why the Lenders Title Insurance Policy is Needed
When it comes to handling the purchase of a home, you may find yourself dealing with residential title and escrow services in order to achieve what you need to obtain the property you desire. Escrow services are available to act as the third party between a buyer, a seller, and a mortgage lender, to ensure a fair, objective, and accountable transaction on the part of all the parties involved.
Mortgages are large financial vehicles requiring a heavy investment. That is why they lenders need protection in the event of legal oversights regarding proper ownership of the property. A lenders’ title insurance policy gives the loaner the security he or she needs to know that the investment was well placed and that any problems that may arise on the part of the title related to inaccurate filings or failing to provide what is promised to them is covered.