When purchasing a home, title insurance is an unavoidable cost—especially if you’re taking out a mortgage. However, there are ways to reduce the expense.
Title insurance, which protects buyers and lenders from ownership disputes or hidden claims on the property, has become a growing concern as housing costs continue to rise. With affordability at the forefront of buyers' minds, many are questioning whether these policies—often costing thousands of dollars—are overpriced.
While some potential changes could bring cost relief in the future, there are still strategies to save money on title insurance right now. Here’s what you need to know.
Understanding Title Insurance
Title insurance safeguards homeowners and lenders against any unexpected claims or legal issues related to property ownership. Before closing on a home, a title company conducts a detailed search to verify that the property is free of unpaid mortgages, tax liens, or inheritance disputes that could affect ownership.
How Does It Work?
Title insurance is a one-time payment made at closing, covering several critical aspects of the home-buying process:
Title Search: The title company examines public records to identify any potential issues, such as contractor liens, unpaid taxes, or disputes over ownership.
Property Boundaries & Easements: The search also reveals any legal rights that others may have to use the property, such as shared driveways or access paths.
Protection Against Future Claims: If an undiscovered claim emerges after the purchase, title insurance helps cover legal fees and financial losses.
Lenders require buyers to purchase a lender’s title insurance policy, which protects the mortgage company in case of a dispute. This coverage ensures that if a claim arises, the lender is compensated up to the loan amount.
Additionally, an owner’s title insurance policy is highly recommended to protect the buyer’s financial investment in the home. In some states, the seller pays for this policy, while in others, the cost is split or falls entirely on the buyer. Fortunately, since much of the cost is tied to the initial title search, adding an owner’s policy is relatively inexpensive—typically a few hundred dollars.
Why Is Title Insurance Under Scrutiny?
As real estate prices climb, buyers are looking for ways to cut costs—including closing expenses and commissions. Title insurance has come under greater scrutiny because its price is based on the home’s value.
In most states, title insurance costs are either set by title agencies or regulated by state governments, with pricing calculated per $1,000 of the home’s value. This means that the higher the purchase price, the more expensive the policy. For instance, the Urban Institute reports that a title insurance premium on a $400,000 home averages $2,000.
Ways to Save on Title Insurance
Compare Title Service Providers – Even if title insurance premiums are regulated in your state, you can still shop around for title services and compare administrative fees.
Ask About a Reissue Rate – If you're refinancing, check with your current title insurance provider about a reissue rate, which can lower costs.
Check the Seller’s Title Insurance Policy – Some buyers may qualify for a reissue rate or discount if they use the same title insurance company as the seller, as the company already has records on file for the property.
Final Thoughts
While title insurance is a necessary expense for home buyers, taking the time to shop around and ask about discounts can lead to significant savings. By understanding how title insurance works and exploring cost-cutting options, buyers and sellers can reduce their expenses without compromising protection. Learn more: Save On A Title Insurance Policy