Planning to refinance? Don't forget about title insurance

The government took action last week to help more homeowners with their mortgage payments. A revamped Home Affordable Refinance Program aims to remove some of the restrictions that have made it difficult for many to qualify assistance.

Historic lows on interest rates, changes coming to government programs such as HARP, it's no wonder so many Q&A and advice columns are dedicating space to homeowners' questions about refinancing, from knowing when to refinance to tips on how to avoid a mortgage refinance misstep.

One common question about refinancing relates to the settlement process, particularly title insurance.

Some homeowners are surprised when they hear they have to purchase a new title insurance policy when they refinance their mortgage. They bought a lender's and owner's policy when they purchased the home, and they want to know why they have to purchase a new title insurance policy.

To the lender, a refinance loan is no different than any other home loan. Your lender wants to insure that the new loan is protected by title insurance, just like the original lender required on your previous loan.  Lenders are protecting their investment against title related defects.

When you refinance, you are only buying a new title for the lender (a lender's policy), so your closing costs should still be less than when you purchased your home. And, while you're shopping around for the best refinance rates, be sure to shop around among title companies.

This will ensure you get the best pricing for your refinance.

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