Whether you are a first-time home buyer or have bought and sold many homes, title insurance is strongly recommended to protect yourself in any home purchase.
What Is Title Insurance
Any real estate transaction should have a clear title to ensure the property is free from liens, back taxes or other encumbrances.
Title Insurance is a specialized form of insurance designed to protect home buyers from potential risks that affect the property title. You can find out more about title insurance in Australia here.
A title search is conducted of public records to verify a property’s legal ownership. It also determines whether there are claims against the property.
If you purchase a property that has an outstanding claim against it, you may become liable for satisfying or settling that claim. Title insurance can protect you against potential legal or financial claims.
What Does Title Insurance Cover
A title search confirms the seller’s legal right to sell the home. A title insurance policy will warrant that the home is free from any potential legal disputes that would prevent or delay the property from being sold.
The most common disputes to a title are title forgeries, back taxes, filing errors, unknown heirs, conflicting wills, liens from unpaid home equity lines of credit or contractors, and undocumented easements.
Disputes to a property’s title can suddenly appear years after you purchased the home. If the previous owner added a room or addition that didn’t meet council building standards, you could find yourself facing thousands of dollars of unanticipated costs.
Is Title Insurance Worth It
There are many things to consider when buying a house. You should ask yourself whether it’s worth it.
While it is likely that you will never have to file a claim against it, it protects you against a wide range of potential problems. If a problem does arise at some point, it is likely to be expensive and difficult to deal with. For that reason, title insurance provides peace of mind for homeowners.
If you decide to protect yourself, only buy from a licensed and regulated company. Your solicitor can make recommendations in this regard.
Types of Title Insurance
There are two types of title insurance. One is designed to protect lenders against title defects, and the second is designed to protect the owner or buyer.
Lender’s policies will protect the bank or financial institution as long as they have an interest in the property. This usually expires when the home loan is paid off.
As a buyer, you also want to protect your interest in the property for as long as you or your heirs have an interest in the property.
How Much Does Title Insurance Cost
Title insurance is not compulsory, like stamp duty or other government charges. It is usually a one-off payment that varies on your property’s price and location.
According to a survey done a couple of years ago, the average cost of title insurance ranged from $370 for a strata property with a purchase price of $500,000 to $1500 for a house with a purchase price of $2 million.
