400 Creekside Drive, Suite 407-409 Pottstown, PA 19464

How Much Does Title Insurance Cost on Average?

Monday, August 3, 2020

Did you know that the cost of title insurance is based on the value of the property, and to calculate you multiply the rate per 1,000 by the price you bought your home? You can get the rate per 1,000 from your insurance company.

Title insurance protects both lenders and borrowers and is essential when buying any property. Keep reading, and we will walk you through title insurance cost.

The Basics of Buying and Owning Property

The title of a home or property is the formal document that shows proof of ownership.

Title insurance is necessary when you buy a property. The purpose of title insurance is to protect the owner and mortgage lender if your property has a pre-existing claim or lien on it.

A lien is like a security interest that binds the debtor to the lender of a property until the debt is paid off.

You want to make sure that before you buy a home or any property, the title is free of delinquent taxes, liens or debt, unmentioned heirs, or other unresolved issues.

During the contract stage of buying a home, a title company searches through public records and goes back many years. According to the American Land Title Association, more than one-third of title searches come back with a problem.

The title company can solve some issues, but usually, it's the seller's job to make sure everything is taken care of and resolved.

Most mortgage lenders require the borrower or buyer of the house to pay for the title search and title insurance on the loan. The coverage is to protect the lender when issues with the title arise.

The loan insurance policy covers the property's loan amount. As you pay your mortgage, the property's loan amount goes down. 

Both the title search fee and lender's title-insurance premium are one-time payments by the buyer.

You want to make sure that you have a Title Insurance Agent before you buy a home, see a list of people you should consult before purchasing a home or property.

Quick History

Before we dive into the cost and fees of title insurance, let's walk through why paying for title insurance is necessary.

The court case Watson v. Muirhead in 1868 went to the Pennsylvania Supreme Court and ruled that the lender and the buyer are protected by title insurance.

Muirhead was a conveyancer. A conveyancer is someone who makes sure a title is clear and transfers ownership from one person to another.

Watson was the buyer of the house and asked Muirhead to look into any issues with the title.

Muirhead found a lien and consulted a lawyer, who said it was not valid. The claim ended up being accurate, and Watson ended up paying a lot of money because of it.

The court found that Muirhead couldn't be held liable for relying on a lawyer's opinion that a title was free and clear.

In 1874, a law was passed permitting title insurance. In 1876, the first tile insurance company started in Philadelphia.

Then the rest of the states followed their lead, and we get back to today.

Title Insurance Cost

Now, we are ready to break down the costs and fees of title insurance.

The total cost of a title insurance policy is around .5% to 1% of the buyer's price for the house. The full charge includes both the lender's and home owner's policy together.

Title insurance costs can vary by state; usually, the higher the price of the house, the more you will pay for title insurance.

If you buy an owner's title policy when you buy the home, you won't need to buy another if you refinance, because you are covered as long as you own that home.

When you get a title insurance quote, the fees may be listed out. In some states, there are laws that the fees are bundled into one title cost quote, while others require they be listed out.

Some potential costs and fees are title search fee, deed preparation fee, wire fee, transfer tax, settlement fee, and document preparation fee.

There are other potential costs and fees, but it's dependent on the state, what's required, and is a case-by-case situation.

The total of your title insurance cost should be the same as what's on your loan estimate. You want to compare the bottom-line of the title insurance cost and make sure it matches the title company fees on your loan estimate.

Tips for Buying a Title Insurance Policy

When you're looking for a title insurance policy, you want to make sure you check out your options. You can shop around if you're buying a home.

Here are some tips:

  1. Negotiate: If you're buying a home, you can look at different insurance options. You may need to negotiate the final choice of title companies if you have a strong preference toward one. This is especially the case if the seller needs to pay the owner's policy premium.
  2. Refinance title insurance can be less expensive: When you get a new loan, you need a new lender's title insurance policy. Sometimes, title companies offer a "reissue rate" because they want to keep your business. Reach out to the title company to get a quote on your current loan.
  3. Combined Policy Discount: If you need a lender's and owner's policy, try to get a discount for buying both policies together.

Get Your Title Insurance Policy Today

If you're looking to buy a home or property, make sure you account for the title insurance cost.

You may need to buy both the lender and owner's policy, and you should look around to make sure you're getting a great deal.

Keep doing your research on title insurance policies or contact us today with questions and get set up with a Title Insurance agent!

View All Recent Posts