What is Title Insurance and why it is Important

By James Copper


o put it simply; title insurance is an insurance policy which protects/indemnifies the buyer/holder for any loss incurred due to omissions or defects in the title of the property.

Title insurance is usually arranged as a single premium policy whereby you pay for the insurance as a lump sum upfront payment. Some mortgage lenders may even stipulate that title insurance be a condition of the mortgage offer however this is not all that common. If title insurance is purchased via the mortgage lender then it is common for the single premium to be added to the loan advance. Title insurance does not just protect the borrower but also serves to protect the lender also.

Taking out an insurance policy can also cut out the need for much of the legal work that a solicitor will usually have to carry out. In this way it can help to speed up the process of remortgaging quite considerably.

Many mortgage brokers will confirm that the timeframe involved in completing a mortgage/remortgage application can differ largely from one application to another however it is for a remortgage deal to take some 30 days to complete, even once the offer has been granted.

Research was recently carried out by one of the major lenders which suggested that the presence of title insurance could slice around 10 days of the normal completion time. Where there are no issues with a case, an application could complete in as little as three days after the point of mortgage offer.

In essence, a title policy will be arranged to protect the validity of the title. A defective title simply means that there is a problem with the mortgage deeds - this commonly means that the deeds may be missing, destroyed, lost, or in some way inadequate. Title can be also be exploited by such problems as fraud - being carried out by the borrower, or indeed against the borrower.

Where suitable title insurance is in place, the policy itself will last for as long as the mortgage term and will guarantee that the loan is valid, enforceable and on a marketable title.

Where a borrower is remortgaging their existing property, the reality is that it is highly unlikely that there will be any issues with title as all the relevant checks would have been carried out when the property is purchased - However, any mortgage lender will still require a suitable amount of legal work to be carried out so as to protect themselves in the event of borrower default.

In the unlikely instance of a problem occurring due to title defect; title insurance is not their to simply solve the immediate problem however it will ensure that no parties to the mortgage lose out financially.