Owning your property free and clear involves more than having a deed in hand. A deed does not cancel certain prior “rights” and claims that may go back in time, months or decades, to the earliest owners of your newly acquired property.
Protecting Your Rights
“What protection,” you may ask “do I have against such claims? How can I be sure my property is really my property?” The answer to both of those questions is title insurance.
Title Insurance is an insured statement of the condition of your “title” or ownership rights to a certain piece of property. An owner’s title insurance policy describes your property in detail and states what limitations, if any, there are to your ownership. (For example, you may take ownership subject to existing liens or encumbrances. Or, easements may have been granted to utility companies or adjacent property owners.)
Most importantly, an owner’s title insurance policy guarantees that the property you are purchasing is free of undisclosed liens, confusion in the rights of ownership, and other clouds on the title. In short, it guarantees that you own the property for which you have negotiated.
In most cases, when purchasing a property with a mortgage, the lender will require you to purchase a lender’s title insurance policy to protect the lender’s security interest in the property. A Lender’s title insurance policy is issued based on the amount of the loan. As the loan balance decreases, the amount of coverage decreases. When the loan is paid off, the lender’s coverage disappears.
*A location drawing is generally satisfactory for the purpose of either a purchase or a refinance and complies with your purchase agreement and/or mortgage lender’s requirements. Effective March 1, 1995, State Regulations require Maryland purchasers provide approval to the title company to furnish a “location drawing” as opposed to a more comprehensive, yet more expensive, “boundary survey.” The required “Approval Form” and “Location Drawing” are included on pages 32 and 33 of this booklet.