If you’re here, chances are that you’re buying a home soon. Congratulations on your new investment and next step in living the dream! We know you’re excited to have a new place to call your own, but make sure to do all your research when buying a home. Some homeowners have outstanding liens that will go to the new homeowner, making them lose the money they invested putting into the home. We don’t want that to happen to you, which is why we have title insurance. Is title insurance needed for full cash payments, though?
How title insurance works
When buying a home, you’re buying the title of the land, not the land itself. A title is the right to own and use the designated property. Owner’s title insurance covers that title and the money spent to gain it. In turn, it pays for any claims or liens on the home from before you moved in. A lien is an unpaid credit claim on the title of your home, even if there has been a change in ownership. Even if you pay cash on the home, you will still have to cover the costs of those claims. Anything from unpaid work on the house to unpaid taxes can count as a lien on your home. When gaining the title of that property, you also gain any liens attached to that property, even if they were not accrued by you. Title insurance covers the liens left by the previous homeowners, so that you will not have to foreclose your new home to pay for those costs.
Why title insurance is needed when paying cash
Paying cash on your home can be a great feeling. You’re free from mortgage payments and ready to start your life in your new home. However, your cash paid for the title of the property, not the outstanding liens from the previous homeowners. Chances are that after paying cash on your new home, you may not be able to afford to pay the property’s unpaid taxes or housework. The companies or governments that have a lien on your property own that portion that the property owners owe them. Now that you own the title, they have a stake in your property and need to be paid. Those costs still apply even if you pay cash on the home. This is where title insurance comes in. Owner’s title insurance helps pay those liens so that you don’t have to foreclose your home to pay them.
If you’re buying a home, we can help cover you with title insurance. Call or come in today to find out more about title insurance and how you can get started. We at Twin City Title are always ready to help.