You've owned your home for years, and always make your payments on time. You're in the process of refinancing when your lender calls to advise that there's a problem with your title report. How can that be? Here's why a title report is important when refinancing.
Title Report Shows Problems
You're refinancing to take care of outstanding debts, and minimizing the costs of refinancing your mortgage is important. Why, then, is your lender requiring a title report? Don't you (and your mortgage company) own your home? The answer is yes, but a title report can reveal title issues that have arisen since you bought your home such as:
- Unpaid supplemental property taxes and assessments
- Liens filed for unpaid or delinquent home improvement costs
- "Silent" second trust deeds arranged when you purchased your home
My Mortgage Company Pays My Property Taxes -- Don't They?
If your mortgage payment includes property taxes and hazard insurance, your mortgage company pays your property taxes as they become due, usually semiannually or quarterly. Mortgage companies may pay supplemental tax bills, but these can "slip through the cracks." If left unpaid, they may result in liens against the title to your home. The usual reason for supplemental tax bills and assessments is rapidly increased property values and/or installation of infrastructure such as roads, public lighting, and parks.
Unpaid property taxes and assessments, along with other outstanding liens, will have to be paid before your refinancing can be completed. Your title report can also reveal liens such as mechanic's liens, which arise from unpaid home improvement and maintenance bills for roofing, and remodeling. Silent second trust deeds do not require payment until you sell or refinance your mortgage. Considering these scenarios when planning your refinance can help avoid surprises in your title report.
