Refinancing Your Home: Do You Need New Title Insurance?

Title Insurance When Refinancing: What You Need to Know

Refinancing your mortgage can be a smart financial move, allowing you to secure a lower interest rate, reduce your monthly payment, access home equity, or change your loan terms. But if you've refinanced before—or are preparing to—you may have noticed that title insurance appears on your closing cost estimate. This raises common questions: Why do I need title insurance again? Don't I already have coverage? Can I save money on this expense?

This comprehensive guide explains how title insurance works when refinancing, clarifies what coverage you already have versus what you'll need, and provides strategies for potentially reducing your refinancing costs.

Understanding Your Existing Title Insurance Coverage

Before diving into refinancing requirements, it's helpful to understand the title insurance coverage you received when you originally purchased your home. As explained in our guide on Owner's vs. Lender's Title Insurance, there are two distinct types of policies:

Your Owner's Title Insurance Policy

When you purchased your home, you likely received (and we highly recommend) an owner's title insurance policy. This policy protects your personal investment in the property against covered title defects. Here's the good news: your owner's policy remains in effect for as long as you or your heirs own the property.

When you refinance, you do NOT need to purchase a new owner's title insurance policy. Your existing owner's coverage continues to protect your equity, regardless of any new financing you arrange.

Your Original Lender's Title Insurance Policy

Your original mortgage came with a lender's title insurance policy, which protected your first lender's investment. However, this policy expires when that loan is paid off—which happens when you refinance. The new lender extending your refinanced loan will require their own title insurance protection.

Why Lenders Require New Title Insurance When You Refinance

It may seem redundant to purchase another title insurance policy when you already cleared title at your original purchase. However, lenders have valid reasons for requiring new coverage:

New Title Issues Can Arise

Between your original purchase and your refinance, various issues could have affected your property's title:

• New liens: You might have unpaid property taxes, contractor liens, or judgment liens that weren't present before
• Recording errors: Mistakes made when recording documents after your purchase
• Easements: New easements granted since your purchase
• Legal actions: Judgments, divorces, or other legal matters affecting the property
• Second mortgages or HELOCs: Additional financing that creates junior liens

The New Lender Wasn't Protected Before

Your new lender didn't benefit from the original title search or lender's policy. They're extending a new loan and need assurance that their investment is protected. The new lender's policy gives them that security.

New Title Search Required

The title company will conduct a new title search as part of your refinance. This search examines what's happened since your original purchase and ensures no issues have emerged that could affect the new lender's security interest.

What to Expect with Refinance Title Costs

The title-related costs for a refinance are typically less than what you paid at your original purchase, but they still represent a meaningful expense. Common charges include:

Lender's Title Insurance Premium

This is the cost of the new policy protecting your refinance lender. The premium is based on your loan amount and varies by state and title company.

Title Search and Examination Fee

The title company charges for conducting the new title search. This is typically less extensive (and less expensive) than the search performed at purchase because they're only examining the period since you bought the home.

Settlement or Closing Fee

The title company charges for handling the closing process—preparing documents, coordinating the signing, disbursing funds, and recording the new mortgage.

Recording Fees

County fees for recording the new mortgage and potentially recording the satisfaction of your old mortgage.

How to Save Money on Refinance Title Insurance

Several strategies can help reduce your title insurance costs when refinancing:

Ask About Reissue Rates

Many title companies offer "reissue rates" or "refinance rates" that provide significant discounts on the lender's policy premium. These discounts are typically available when:

• You refinance within a certain period of your original purchase (often 3-10 years)
• You use the same title company that handled your original purchase
• Your loan amount doesn't exceed the original loan amount by more than a certain percentage

Reissue rate discounts can be substantial—often 40% to 60% off the standard premium. Always ask your title company about available discounts.

Compare Title Company Costs

In many states, you can choose your title company for a refinance. Compare quotes from multiple providers, keeping in mind both the premium and other fees. However, don't sacrifice quality for price—work with a reputable company that will handle your transaction properly.

Negotiate with Your Lender

In competitive lending environments, some lenders offer to pay a portion of closing costs, which could include title insurance. Ask your lender about available credits or promotions.

Request the Original Title Policy

If you're using a different title company than your original purchase, provide them with a copy of your original owner's policy. This can sometimes help qualify for reissue rates or other discounts.

Enhanced Coverage Options

While you don't need a new owner's policy when refinancing, some title companies offer enhanced coverage that could be worth considering:

Endorsements

You may be able to add endorsements to your existing owner's policy that expand coverage for certain risks. Ask your title company what options are available.

Increased Coverage Amounts

If your home has appreciated significantly since purchase, your owner's policy may no longer cover your full equity. Some enhanced policies include inflation protection that increases coverage over time. If your policy doesn't have this feature, you might consider supplemental coverage.

The Refinancing Title Process

Here's what to expect from the title process during your refinance:

1. Order placed: Your lender orders title work from a title company
2. Title search: The title company examines records since your purchase
3. Title commitment issued: You receive a document outlining the coverage terms and any exceptions
4. Documents prepared: Closing documents are prepared for your refinance
5. Closing: You sign documents and the new loan funds
6. Recording: The new mortgage is recorded and the old one satisfied
7. Policy issued: The new lender's policy is issued to your lender

For more details about what happens during closing, see our guide on Understanding the Escrow Process.

Common Refinancing Title Issues

The title search for a refinance occasionally uncovers issues that must be addressed before closing:

Unreleased Liens

Sometimes a prior lien (like your original mortgage) shows as unreleased in public records even though it was paid off. The title company will work to obtain proper documentation.

Judgment Liens

If any judgments have been entered against you since purchase, they may appear as liens on the property that must be addressed. Learn more in our guide on Property Liens.

Recording Errors

Errors in previously recorded documents may need correction before closing. Read about these issues in Recording Errors and Your Title.

Name Changes

If your name has changed since your purchase (due to marriage, for example), additional documentation may be required to establish the chain of title.

Should You Refinance? Title Cost Considerations

When evaluating whether refinancing makes financial sense, factor title and closing costs into your break-even analysis. Consider:

• Total closing costs including title insurance
• Monthly payment savings
• How long you plan to stay in the home
• Whether you're rolling costs into the loan (which increases your balance)

Many financial advisors suggest refinancing is worthwhile if you can recoup closing costs within 2-3 years through payment savings. However, your specific situation may warrant different calculations.

The Bottom Line on Refinancing and Title Insurance

While you will need a new lender's title insurance policy when refinancing, your owner's coverage remains intact. By understanding the process and taking advantage of available discounts, you can minimize this cost while still ensuring proper protection for your new lender—and keeping your transaction on track to close smoothly.

If you're preparing to refinance and have questions about title insurance or the closing process, reach out to your title professional. They can provide specific information about costs, available discounts, and what to expect throughout your refinancing transaction.