Title Insurance on Refi

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Topic Author
TropikThunder
Posts: 1951
Joined: Sun Apr 03, 2016 5:41 pm

Title Insurance on Refi

Post by TropikThunder » Thu Aug 22, 2019 1:27 pm

With mortgage rates declining recently, I've been evaluating options for refinancing my mortgage. I keep seeing other BH's posting quite low rate offers and can't understand why I don't see the same when I put in my information (zip code, property value, mortgage amount, credit score etc). One thing I inadvertently noted is that several of the sites I'm looking at quote a much higher rate for lender's title insurance on a refi vs on a purchase. I forgot to change Purchase to Refinance before I hit enter or I wouldn't have noticed.

For example, on AimLoan with my particulars ($420k property, $330k mortgage, 760+ credit score, 98203 zip code near Seattle):
- Purchase: 3.75% rate; $1,026 lender credit offsetting $995 lender fee; $760 lender's title insurance
- Refinance: 3.75% rate, $729 lender credit offsetting $995 lender fee; $1,870 lender's title insurance

All other items are identical (settlement fee, appraisal, credit report, etc). In all, it's $1,400 more in closing costs for the refi vs purchase.

Questions:
1. Why is a refi considered less valuable to the lender (lower lender credit for the refi)?
2. Why is the lender's title insurance so much higher on the refi? I figured it would be less since there is already a lender policy in place from the original purchase.

I know I should look at other websites but I've seen similar higher cost for title insurance on a couple local lenders' webpages.
Last edited by TropikThunder on Fri Aug 23, 2019 1:03 am, edited 1 time in total.

Mako
Posts: 191
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Re: Title Insurance of REfi

Post by Mako » Thu Aug 22, 2019 1:45 pm

Maybe it's something weird about your zip. In my zip, with similar property/mortgage values with aimloan, title insurance is $450 for a refi and $1003 for a purchase.

But similar to yours, the lender credit is less for a refi for some reason.

GuyFromGeorgia
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Re: Title Insurance of REfi

Post by GuyFromGeorgia » Thu Aug 22, 2019 2:25 pm

Could vary by state, but I believe title insurance is something you can always select on your own. If you go with the mortgage lender's preferred vendor, maybe it could be faster, but more than likely they are just getting a kickback. The key to keeping title insurance low on a refi is to specify you're going with your own company, and then select the one that you used previously (for the purchase or previous refi). You're essentially paying them to re-certify their previous work.

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unclescrooge
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Re: Title Insurance of REfi

Post by unclescrooge » Thu Aug 22, 2019 3:32 pm

Title insurance has two components, lenders and owners insurance.

On a purchase, the seller pays for owners insurance.

On a refi, owner pays for both.

On refis, I skip the owners title. Ownership isn't changing so I didn't see the point to get new owners policy.

Topic Author
TropikThunder
Posts: 1951
Joined: Sun Apr 03, 2016 5:41 pm

Re: Title Insurance of REfi

Post by TropikThunder » Thu Aug 22, 2019 5:14 pm

unclescrooge wrote:
Thu Aug 22, 2019 3:32 pm
Title insurance has two components, lenders and owners insurance.

On a purchase, the seller pays for owners insurance.

On a refi, owner pays for both.

On refis, I skip the owners title. Ownership isn't changing so I didn't see the point to get new owners policy.
That doesn’t address my question though. The two quotes for title insurance I listed were lender-only, not lender + owner.

Topic Author
TropikThunder
Posts: 1951
Joined: Sun Apr 03, 2016 5:41 pm

Re: Title Insurance of REfi

Post by TropikThunder » Thu Aug 22, 2019 5:15 pm

Mako wrote:
Thu Aug 22, 2019 1:45 pm
Maybe it's something weird about your zip. In my zip, with similar property/mortgage values with aimloan, title insurance is $450 for a refi and $1003 for a purchase.

But similar to yours, the lender credit is less for a refi for some reason.
I tried my old zip code in the DFW area and it was much higher on the refi too. Weird.

LoveTheBogle
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Re: Title Insurance of REfi

Post by LoveTheBogle » Thu Aug 22, 2019 5:27 pm

Weird indeed. Purchase and refi lender's title insurance should be fairly similar. Of course with the purchase owner's policy will usually come into play as well.

Also title insurance is area specific. Your title insurance in WA may be completely different than TX as it is in CA, etc.

seawolf21
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Re: Title Insurance of REfi

Post by seawolf21 » Thu Aug 22, 2019 8:30 pm

unclescrooge wrote:
Thu Aug 22, 2019 3:32 pm
Title insurance has two components, lenders and owners insurance.

On a purchase, the seller pays for owners insurance.

On a refi, owner pays for both.

On refis, I skip the owners title. Ownership isn't changing so I didn't see the point to get new owners policy.
IME Seller wouldn’t be paying for buyer’s title insurance. They could care less whether the buyer obtains home owner title insurance.

If owner already has title insurance, there is no reason to obtain one on a refi; the old one remains valid. A refi quote wouldn’t include a quote for owner title insurance.

ChicagoBear7
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Re: Title Insurance of REfi

Post by ChicagoBear7 » Thu Aug 22, 2019 8:49 pm

seawolf21 wrote:
Thu Aug 22, 2019 8:30 pm
unclescrooge wrote:
Thu Aug 22, 2019 3:32 pm
Title insurance has two components, lenders and owners insurance.

On a purchase, the seller pays for owners insurance.

On a refi, owner pays for both.

On refis, I skip the owners title. Ownership isn't changing so I didn't see the point to get new owners policy.
IME Seller wouldn’t be paying for buyer’s title insurance. They could care less whether the buyer obtains home owner title insurance.

If owner already has title insurance, there is no reason to obtain one on a refi; the old one remains valid. A refi quote wouldn’t include a quote for owner title insurance.
Where is it common for the seller of a property to not guarantee good title through the providing of title insurance to the buyer? How do you know what you are buying?

Mako
Posts: 191
Joined: Wed Feb 28, 2007 9:34 am

Re: Title Insurance of REfi

Post by Mako » Thu Aug 22, 2019 9:17 pm

ChicagoBear7 wrote:
Thu Aug 22, 2019 8:49 pm

Where is it common for the seller of a property to not guarantee good title through the providing of title insurance to the buyer? How do you know what you are buying?
You do your due diligence. In part by buying title insurance.

In MD and VA I’ve never been part of a transaction where the seller provided title insurance. Double digit transactions. Real estate is different everywhere.

seawolf21
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Re: Title Insurance of REfi

Post by seawolf21 » Fri Aug 23, 2019 12:10 am

ChicagoBear7 wrote:
Thu Aug 22, 2019 8:49 pm
seawolf21 wrote:
Thu Aug 22, 2019 8:30 pm
unclescrooge wrote:
Thu Aug 22, 2019 3:32 pm
Title insurance has two components, lenders and owners insurance.

On a purchase, the seller pays for owners insurance.

On a refi, owner pays for both.

On refis, I skip the owners title. Ownership isn't changing so I didn't see the point to get new owners policy.
IME Seller wouldn’t be paying for buyer’s title insurance. They could care less whether the buyer obtains home owner title insurance.

If owner already has title insurance, there is no reason to obtain one on a refi; the old one remains valid. A refi quote wouldn’t include a quote for owner title insurance.
Where is it common for the seller of a property to not guarantee good title through the providing of title insurance to the buyer? How do you know what you are buying?
Not sure where you are located but owner title insurance is not backed by seller; it’s back by title insurer.

Seller also doesn’t pay for title search or title insurance; buyer does. Seller paying for it leads to potential conflict of interest.

Jakabedy
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Re: Title Insurance of REfi

Post by Jakabedy » Fri Aug 23, 2019 12:47 am

Title insurance is state specific and who pays is locality specific. In my state (New Mexico) it’s regulated, so it doesn’t matter where you “shop”, the price will be the same. Also in my state it is customary for the seller to pay for the owner’s title policy, while the purchaser pays for the lender’s policy. The regulated prices are very high for the owner’s policy, and this OPTIONAL policy is included in the boilerplate of all contracts. When I realized this during my first purchase here, and sought to later decline the coverage, I got the runaround that it was “in the contract” and that I shouldn’t care because the seller was paying. It’s a racket.

In my former state (Alabama) an owner’s policy was clearly optional and most people never bought it. I will say that in New Mexico there are still land disputes that date back to the Treaty of Guadalupe-Hidalgo, so it probably is a bit more risky here.

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unclescrooge
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Re: Title Insurance of REfi

Post by unclescrooge » Fri Aug 23, 2019 9:15 am

seawolf21 wrote:
Thu Aug 22, 2019 8:30 pm
unclescrooge wrote:
Thu Aug 22, 2019 3:32 pm
Title insurance has two components, lenders and owners insurance.

On a purchase, the seller pays for owners insurance.

On a refi, owner pays for both.

On refis, I skip the owners title. Ownership isn't changing so I didn't see the point to get new owners policy.
IME Seller wouldn’t be paying for buyer’s title insurance. They could care less whether the buyer obtains home owner title insurance.

If owner already has title insurance, there is no reason to obtain one on a refi; the old one remains valid. A refi quote wouldn’t include a quote for owner title insurance.
IME, a buyer wouldn't buy a $700k starter home unless the seller guaranteed clear title, or paid for title insurance.

I guess things are dependent on local customs.

transient_academic
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Re: Title Insurance of REfi

Post by transient_academic » Fri Aug 23, 2019 9:31 am

GuyFromGeorgia wrote:
Thu Aug 22, 2019 2:25 pm
Could vary by state, but I believe title insurance is something you can always select on your own. If you go with the mortgage lender's preferred vendor, maybe it could be faster, but more than likely they are just getting a kickback. The key to keeping title insurance low on a refi is to specify you're going with your own company, and then select the one that you used previously (for the purchase or previous refi). You're essentially paying them to re-certify their previous work.
Just a word of caution here, I did this thinking I would get a lower cost but I didn't actually force a price quote out of the title insurance provider when I did this. The title insurance provider merely said the refinance would be cheaper than a purchase. When it actually came time to close, I was rather displeased to note that not only was the title insurance cost more than what the lender would have provided, it was more than what I paid for the purchase the year before!

They claimed that in the year between when I bought and when I refinanced, they raised their prices. But they were waiving some aspect of the fee they would have charged for a new purchase. It was too close to closing at that point to change the title insurance provider and it was only a few hundred dollars extra, but I thought about blowing up the whole thing just out of spite.

mariezzz
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Re: Title Insurance of REfi

Post by mariezzz » Fri Aug 23, 2019 2:42 pm

TropikThunder wrote:
Thu Aug 22, 2019 5:14 pm
unclescrooge wrote:
Thu Aug 22, 2019 3:32 pm
Title insurance has two components, lenders and owners insurance.

On a purchase, the seller pays for owners insurance.

On a refi, owner pays for both.

On refis, I skip the owners title. Ownership isn't changing so I didn't see the point to get new owners policy.
That doesn’t address my question though. The two quotes for title insurance I listed were lender-only, not lender + owner.
It's not the case that the seller always pays for owners insurance. I think that depends on the state, or possibly even area. I've never seen that on any property I've bought.

Title insurance is a pretty big scam in general. The state of IA saw this, and they put into place a much cheaper alternative. It would be good if other states did this. Title simply cannot sell title insurance within the state of Iowa.
https://danilsonlaw.com/wont-find-title ... on-better/
https://lawreviewdrake.files.wordpress. ... r_note.pdf

GreenGrowTheDollars
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Re: Title Insurance on Refi

Post by GreenGrowTheDollars » Fri Aug 23, 2019 4:36 pm

My owner's title policy paid off in our first year of ownership when a subcontractor filed a mechanics lien after a dispute with the builder on the quality of the work. I sent the notifications to the title insurer and the problem was fully resolved within a month or so.

My neighbors turned out to own part of another neighbor's house due to a bad survey. Somehow the title insurers took care of a fairly complex legal/surveying/adjustment of deeds process to get the situation straightened out for both homeowners -- though I don't know whether it was the lender or the owner's policy that kicked in for that.

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jfn111
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Location: Minnesota

Re: Title Insurance on Refi

Post by jfn111 » Fri Aug 23, 2019 4:40 pm

In MN the Buyer pays for the banks title insurance and their own policy if they choose. The title insurance is handled by the title company and I'm sure they get a nice kickback. :shock:

GreenGrowTheDollars
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Re: Title Insurance of REfi

Post by GreenGrowTheDollars » Fri Aug 23, 2019 4:47 pm

mariezzz wrote:
Fri Aug 23, 2019 2:42 pm
It's not the case that the seller always pays for owners insurance. I think that depends on the state, or possibly even area. I've never seen that on any property I've bought.

Title insurance is a pretty big scam in general. The state of IA saw this, and they put into place a much cheaper alternative. It would be good if other states did this. Title simply cannot sell title insurance within the state of Iowa.
https://danilsonlaw.com/wont-find-title ... on-better/
https://lawreviewdrake.files.wordpress. ... r_note.pdf
I'm not surprised that lawyers (danilson law & the Drake Law Review) think that having lawyers responsible for issuing a title opinion on a title abstract is a good idea -- but I don't see how paying a lawyer PLUS paying into the Iowa state title guarantee fund is somehow saving big bucks. The Law Review article does note that the Iowa process is a lot slower. Maybe I'm misunderstanding some aspect of this, but it doesn't seem to be a savings. :confused

mariezzz
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Re: Title Insurance of REfi

Post by mariezzz » Sat Aug 24, 2019 9:24 pm

GreenGrowTheDollars wrote:
Fri Aug 23, 2019 4:47 pm
mariezzz wrote:
Fri Aug 23, 2019 2:42 pm
It's not the case that the seller always pays for owners insurance. I think that depends on the state, or possibly even area. I've never seen that on any property I've bought.

Title insurance is a pretty big scam in general. The state of IA saw this, and they put into place a much cheaper alternative. It would be good if other states did this. Title simply cannot sell title insurance within the state of Iowa.
https://danilsonlaw.com/wont-find-title ... on-better/
https://lawreviewdrake.files.wordpress. ... r_note.pdf
I'm not surprised that lawyers (danilson law & the Drake Law Review) think that having lawyers responsible for issuing a title opinion on a title abstract is a good idea -- but I don't see how paying a lawyer PLUS paying into the Iowa state title guarantee fund is somehow saving big bucks. The Law Review article does note that the Iowa process is a lot slower. Maybe I'm misunderstanding some aspect of this, but it doesn't seem to be a savings. :confused
It was a lot cheaper. The lawyer cost about $125 (10 years ago) when i closed.

talzara
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Joined: Thu Feb 12, 2009 7:40 pm

Re: Title Insurance of REfi

Post by talzara » Sun Aug 25, 2019 10:44 am

GreenGrowTheDollars wrote:
Fri Aug 23, 2019 4:47 pm
I'm not surprised that lawyers (danilson law & the Drake Law Review) think that having lawyers responsible for issuing a title opinion on a title abstract is a good idea -- but I don't see how paying a lawyer PLUS paying into the Iowa state title guarantee fund is somehow saving big bucks. The Law Review article does note that the Iowa process is a lot slower. Maybe I'm misunderstanding some aspect of this, but it doesn't seem to be a savings. :confused
What you're missing is that 85% of the title insurance premium goes to pay commissions.

The Iowa Finance Authority does not pay commissions, so it costs much less than private insurers. Iowa Title Guaranty charges only $140 to insure a title up to $500k for simultaneous coverage, both lender's and owner's. Even after paying a lawyer and an escrow agent, you're still saving a lot of money.

Here's the price list: http://www.iowafinanceauthority.gov/Fil ... dFile/5117

Please see my post from 2017 for a more complete explanation: viewtopic.php?t=214466#p3295362

JGoneRiding
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Re: Title Insurance of REfi

Post by JGoneRiding » Sun Aug 25, 2019 10:48 am

Mako wrote:
Thu Aug 22, 2019 1:45 pm
Maybe it's something weird about your zip. In my zip, with similar property/mortgage values with aimloan, title insurance is $450 for a refi and $1003 for a purchase.

But similar to yours, the lender credit is less for a refi for some reason.
I think it must be something to wa state. I am not any where around Seattle and see similar results.

talzara
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Re: Title Insurance of REfi

Post by talzara » Sun Aug 25, 2019 10:51 am

mariezzz wrote:
Sat Aug 24, 2019 9:24 pm
GreenGrowTheDollars wrote:
Fri Aug 23, 2019 4:47 pm
I'm not surprised that lawyers (danilson law & the Drake Law Review) think that having lawyers responsible for issuing a title opinion on a title abstract is a good idea -- but I don't see how paying a lawyer PLUS paying into the Iowa state title guarantee fund is somehow saving big bucks. The Law Review article does note that the Iowa process is a lot slower. Maybe I'm misunderstanding some aspect of this, but it doesn't seem to be a savings. :confused
It was a lot cheaper. The lawyer cost about $125 (10 years ago) when i closed.
The reason it costs only $125 is that Iowa lawyers compete with each other to issue cheap title abstracts.

The cost of the abstract is not hidden in the commission, as it is in the other 49 states. Iowa lawyers have to disclose what they're actually charging for the abstract, so buyers can shop around for the lowest price. As long as the Iowa Finance Authority is willing to issue an insurance policy based on the abstract, it's a good abstract.

talzara
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Joined: Thu Feb 12, 2009 7:40 pm

Re: Title Insurance on Refi

Post by talzara » Sun Aug 25, 2019 11:33 am

TropikThunder wrote:
Thu Aug 22, 2019 1:27 pm
Questions:
1. Why is a refi considered less valuable to the lender (lower lender credit for the refi)?
2. Why is the lender's title insurance so much higher on the refi? I figured it would be less since there is already a lender policy in place from the original purchase.
The lender credit is lower because it costs more to process a refinancing. Many homeowners are serial refinancers, so they are more likely to have tax liens or multiple mortgages on the house. With a new purchase, the previous owner is more likely to have only one mortgage or clear title to the house.

Title insurance companies usually charge 50% less for a refinancing. You're seeing the opposite. It's either a mistake, a different insurance company, or a commission rebate. Since most of the premium goes to pay commissions, there is a lot of money that can be rebated.

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