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REAL ESTATE FAQ'S
1. What is Title Insurance?
1.
What is Title Insurance?
2. What is a Mortgagee Policy, and why am I required to purchase it? A Mortgagee Policy is a title insurance policy that almost all mortgage lenders require a borrower to purchase in the lender's name. Lenders require the purchase of the Mortgagee Policy to protect them from any liens or other irregularities in the history of the real property's title that may have financial consequences. Please note that a Mortgagee Policy does not protect the interest of the owner of the real property.
3. Is there a policy that protects the owner's interest? Yes, an owner of real property, can purchase insurance, which protects you from financial loss caused by circumstances which adversely affect or restrict the title to the real property. The type of policy which protects the owner of the real property is called the "Owner Policy". The coverage under the Owner Policy continues in force as long as the owner has an interest in the property.
4.
How expensive is the Owner Policy? Title insurance premiums are regulated by the individual states and are determined by the value of the real property. Title policy premiums are a one time fee and are paid when the policy is issued.
5.
What types of risks are covered by the Owner Policy? •
lost or forged deeds An
Owner Policy protects the owner of the real property from all
of these hidden risks. In addition, an owner's policy covers all
legal expenses incurred in defending a claim against the owner's
title, even if that claim has no merit.
6. What happens if the value of the property increases to an amount greater than that of the policy amount? If the owner is the primary resident of the property, the Owner Policy provides added protection in that during each of the first five years of the policy, additional coverage is added at no cost t the owner. Therefore, the owner's equity is protected beyond the value of what's covered in the original policy.
7.
What other forms of insurance may a lender require an owner to
have? a. Casualty Insurance (a.k.a. Homeowner's Insurance). This type of insurance protects an owner and a lender against loss from fire, theft, and other unfortunate events. Inasmuch as the events can reduce the value of real property below the amount for which it was mortgaged, a lender will insist on having its name added to the insurance policy when you secure an initial mortgage or refinance. This type of insurance requires an annual premium. b. Flood Insurance. It is important to note that a Casualty Insurance policy does not cover against flooding. Therefore, if the real property falls within a designated flood hazard area, a lender will insist that an owner have this insurance, and that its name is on the policy. This type of coverage usually requires an annual premium. c. Private Mortgage Insurance (PMI). If an owner finances more than 80% of the value of the real property, a lender may require the owner to secure PMI to protect the lender. This type of insurance is paid annually, and its rate often decreases each year. Once an owner has obtained 20% equity in the property, the lender will permit the owner to cancel the PMI policy.
8. What is a Declaration of Homestead (Massachusetts)? The Declaration of Homestead Act was established so that Massachusetts residents could protect their property from creditors forcing a sale of their property in order to satisfy debt. This protection is available to single or married homeowners, for houses or condominiums, which are the principal residence of declarant. The Declaration of Homestead exempts up to $500,000 in the value of the home from creditors, with some exceptions. Please note, the Declaration of Homestead does not prevent mortgage lenders from attaching and selling the residence of the declarant if the owner(s) is in default of their mortgage, nor will it prevent attachment and sale due to unpaid state and federal taxes, court orders for child support and court orders for spousal support. The Declaration of Homestead is a legal document that is filed at the Registry of Deeds where the deed to your property is recorded and informs the public that the declarant is asserting his/her right to protect the equity of the property from subsequent creditors.
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