The Perfect Property

Should You Purchase Title Insurance If You Pay Cash For A House?

by Zachary Thompson

Buying a house is a big ordeal that requires a lot of paperwork and fees; however, buying a house with cash has some differences when compared to buying a house with a loan. One difference you will have with these two methods of buying a house involves title insurance. Title insurance is something that is designed to protect you or the lender involved with the deal if there are problems with the title of the house you purchase, but it is not something that is mandatory to purchase if you pay cash for a house.

The Two Types Of Title Insurance

The first thing to understand about title insurance is that there are two different types:

  1. Owner's title insurance – This type of policy is designed to protect the buyer against title problems, such as fraudulent titles or liens on a title. If you buy a house and purchase title insurance, the title insurance company will be responsible for any problems that may come up with the title, and this will protect you.
  2. Lender's title insurance – This type of policy is designed only to protect the lender that offers the loan on the house. If a problem appears with the title, the lender will be fully protected by the policy. The title insurance company would be responsible to pay for any expenses that are required to fix the problems.

If you buy a house with a loan, you will be forced to pay for lender's title insurance, but you will most likely have the choice whether or not you also purchase owner's title insurance.

The Factors To Consider

Purchasing title insurance is not free. The costs will depend on the types you purchase, the value of your home, and the title company you hire for the insurance. On average, you can expect to pay around $3.50 per $1,000 on an owner's policy, while a lender's policy can cost around $2.50 per $1,000. Because you are paying cash, you would never need a lender's policy, but you could choose to purchase an owner's policy.

Another factor to consider is the level of risk you want to take. If you do not care if you have to deal with title issues at a later point, going without title insurance might be a good choice. On the other hand, if you want to make sure you will not be responsible for title issues in the future, paying for the insurance would probably be a better option.

Title insurance is good to have, but it is not a necessity when paying cash for a home. To learn more about title insurance and other real estate title services in your area, contact a real estate title company today.