If I am using a closing costs mortgage calculator to determine how the closing costs are affecting the interest rate and costs of a refinance, why do I have to include costs like title insurance when I paid for this when I bought the home?

When the buyer of a property secures a mortgage for financing, one of the costs of obtaining the loan is title insurance.  At the time of the purchase there is usually two different policies.  One is the owner’s policy and protects the new homebuyer against defects in the title of the property.  Defects are usually problems that arise after the loan is made and include items like unknown liens on the property, real estate tax deficiencies and question about the properties ownership.  The other title insurance policy is the insurance to protect the lender against defects.  The lenders policy ends when the loan is paid off.  When a borrower refinances, the new lender will need title insurance to protect their interests against title defects.  It is unfortunate that a brand new policy is needed for every new loan transaction; sometimes if the title insurance was procured recently the new lender may offer a discount on the cost of the title insurance.  In general, the cost of the insurance will have to be paid again and should be included in the costs listed on the mortgage calculator.

This entry was posted on Wednesday, December 10th, 2008 at 10:37 pm and is filed under Mortgage FAQs. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.