Do I Need Title Insurance to Purchase Property in Brooklyn?
Many first-time property buyers in New York City are unfamiliar with the concept of title insurance. At first glance, it sounds like yet another mysterious closing cost that seems unnecessary. But title insurance can provide critical protection for both you and your mortgage lender in the event of an unforeseen issue affecting the legal ownership of your newly acquired real estate.
What Is Title Insurance?
Before purchasing any real estate, it is crucial to perform a title search. A title search is basically an examination of any public records affecting the property. This includes not just the deed but also any potential liens or court judgments against the property. Essentially, a title search can reveal critical “defects” that could affect your ability to maintain ownership of the property after the sale closes.
Typically, your real estate attorney or mortgage lender will hire a professional title company to perform a title search. But title searches do not always uncover all potential defects. For example, perhaps the original deed was forged or there was a secured lien on the property missed by the title search. This is where title insurance comes into play. A title insurance policy protects against future claims for any defects that were not discovered prior to the sale of the property.
There are actually two kinds of title insurance policies in New York. The first is an owner’s policy, which protects you as the buyer. An owner’s policy usually protects you for the full original sales price of the property. Some title insurance policies also include optional “market value” endorsements that account for increases in the property’s value over time.
The second type of title insurance is a lender’s policy. This comes into play if you take out a mortgage to purchase the property. As the name suggests, a lender’s policy protects the value of the mortgage loan. Unlike an owner’s policy, the value of a lender’s policy generally decreases over time as the owner makes regular mortgage payments.
How Much Does Title Insurance Cost?
In New York, the buyer is generally responsible for purchasing any title insurance. Most lenders require the buyer purchase a lender’s policy in order to secure their mortgage. Technically, purchasing an owner’s policy is optional, but it is usually a good idea to do so. Fortunately, when you purchase both policies together at closing you pay a reduced rate under New York law.
The actual cost of title insurance varies between 0.5 percent and 1 percent of the purchase price in most cases. This is a one-time cost. Once you purchase title insurance, the policy remains in effect for as long as you (or your heirs) continue to own the property. You will not have to make any further premium payments.
Contact a New York City Title Insurance Lawyer Today
Having a clear title to your property is about more than peace of mind. It is about protecting your investment. It is therefore important to work with an experienced New York City title searches, title insurance, and title opinions lawyer who can guide you through the process. Contact Yeung & Associates, PLLC, today at 718-889-7568 to schedule a consultation.