What the lender's policy protects
It insures that the lender's mortgage is a valid lien with the priority the lender expects, usually first in line. Coverage equals the loan amount and shrinks as the loan is paid down. It ends when the loan is paid off.
Why borrowers pay for it
The lender requires it as a condition of the loan, so it shows up as a borrower cost on your loan estimate and closing disclosure. It's listed as a title service you can shop for.
Lender's policy on a refinance
A refinance pays off the old loan and records a new one, so the new lender needs its own policy. Because the property was insured recently, a reissue or refinance rate may apply. Ask for it when you request a quote.
Common questions
What are the two types of title insurance?
An owner's policy, which protects the buyer, and a lender's policy, which protects the mortgage lender.
Why would a lender have a title policy?
To make sure its mortgage is a valid first lien. If a hidden problem knocked the mortgage down the line or voided it, the policy covers the lender's loss.
Do I need a lender's policy if I pay cash?
No. There's no lender to insure. You'd only buy an owner's policy.