Title insurance is typically required in a cash out refinance to protect both the lender and the borrower against any potential title issues or defects that may exist with the property title. These issues could include:
- Undiscovered liens or encumbrances
- Claims of ownership by a third party
- Forgeries or fraud in the chain of title
- Errors in the public records
Title insurance provides financial protection in the event that these issues arise, which could jeopardize the ownership of the property and the security of the loan. By having title insurance, the lender and the borrower can be confident that the property title is clear and the loan is secure.
This is a supplementary post to: What Is A Cash Out Refinance In Real Estate Investing?