A home purchase is one of the largest investments you can make, so you want to make sure you’re protected. Owner’s title insurance does just that. Do you need title insurance? How much does it cost? Who pays for title insurance? These are the questions that come up most often in New Jersey.
What Is Owner’s Title Insurance?
Car insurance and home insurance insure you if a tree falls on your car or your house next week; they insure you in the future. Title insurance insures backwards in time.
It makes sure that the house you’re buying, you’re not getting stuck with Joe Schmo’s lien, a federal tax lien, or his Atlantic City gambling debt, things like that.
Do You Know What Title Insurance Is?
That is why you do an inspection to ensure that the structure of the home is good; the owner’s title insurance makes sure that the title integrity is there as well.
Title insurance ensures that the rights and the interest to the property are as expected, and it protects the new homeowner from any future claims from the past against this property. It protects your bank, and it protects you against things like liens and easements. It encumbrances that may have been placed upon the property prior to your ownership.
What Title Means
Title means something you own. When you own something, you have the title to it, so when you own a property, you get the title. When you buy a car, if you buy it outright, you get the title.
Do You Need Owner’s Title Insurance in New Jersey?
On the closing disclosure form, it says an owner’s set of policies is optional. A lender’s policy protects your lender, not you as the owner. You need a lender’s policy if you have a mortgage on the property, and an owner’s policy protects you. Good luck finding an attorney in New Jersey who is going to let you buy a home without an owner’s policy.
Even if you refi in five years, you don’t need a new owner’s policy, because until you sell that property, you have that owner’s policy that you can whip out and say you have owned this home free and clear. It should be kept in a fireproof safe with your deed. It’s not required, but it is definitely strongly recommended.
If you’re not getting a mortgage, you can still purchase owner’s title insurance. Most people don’t know what it is and will never use it, but those who do need it are really thankful they have it.
Owner’s Policy vs Lender’s Policy
There are two types of insurance policies. The owner’s policy protects the owner for as long as they own the property, and the lender’s policy insures the lender for the life of the loan. For buyers paying cash, you’re not going to need a lender’s policy, but you will still need an owner’s policy.
Unlike other insurance policies that have either an annual or even a monthly premium, title insurance is a one-time purchase when real estate is purchased or a loan is originated.
What a Title Search Uncovers
Real estate attorneys order the title binder, the title search, and the owner’s title insurance. It searches all public records related to a particular property. It looks at deeds, past mortgages, divorce decrees, tax records, child support records, and other judgments.
Nobody else can lay claim to any part of the property that you’re buying; nobody else has title; it’s a clean title, so it is all yours. What they’re looking for is liens, something like unpaid taxes. An easement is somebody else’s right to use the property.
Encumbrances are a catch-all term; it includes liens, easements, and it also includes zoning laws. The job is to find those open mortgages and make sure that they get paid off prior to closing, so that the buyers are not buying the sellers’ problems.
Who Pays for Title Insurance in New Jersey?
In some other states, the seller pays for it; in New Jersey, the buyer pays for it, paid one time at the closing table. Do your due diligence, and make sure that whoever you are working with is going to be there in 10 to 15 years if there’s a problem.
How Much Does Owner’s Title Insurance Cost
It varies. The more coverage you need, the higher the risk, so there’s no flat fee; it is all state-regulated. Shop around, and title companies should really all be within a very small amount of difference. New Jersey tells title companies what to charge, so no matter who you pick it should all be around the same.
Frequently Asked Questions
Is an owner’s policy required?
It’s not required, but it is definitely strongly recommended
How long does an owner’s policy last?
It protects you for the entire time you own that property. Even if you refi in five years, you don’t need a new owner’s policy cuz until you sell that property, you have that owner’s policy.
What does a title search look at?
It searches all public records related to a particular property. It’s looking at deeds, it’s looking at past mortgages, it’s looking at divorce decrees, tax records, child support records, other judgments
What is an easement?
An easement is somebody else’s right to use the property
Who pays for title insurance in New Jersey?
In some other states, the seller pays for it. In New Jersey, the buyer pays for it
Conclusion
This is the biggest investment you’re gonna make in your life, and owner’s title insurance really, in the end, is a drop in the bucket compared to the home itself.
Title insurance shouldn’t even be a question of whether or not you get it, even if you’re not getting a lender; it’s there to protect you, and it’s an asset when you go to sell the property.