In response to a comment to a prior post, when refinancing, the new lender, even if it is the same bank currently holding your mortgage, will require a new title insurance policy to protect its interest in the property. This is because the bank will want to insure itself over any items that may have appeared since the old mortgage such as a judgment against the homeowner or a mechanic's lien, for example.
The cost of this policy is usually paid for by the homeowner. For HELOCs, some banks do not require title insurance and others will pay for it (provided you do not pay off the loan for a certain amount of time).
The good news is that title insurance rates for refinances are dramatically lower than for a purchase. This is especially true if you are refinancing within 10 years of the original mortgage in which case you are entitled to a "reissue rate" which is 50% of the regular refinance rate up to a loan amount of $475,000.00 and 70% of the regular refinance rate above a loan amount of $475,000.00. For example, the regular refinance rate is $1,746 for a loan amount of $400,000.00 so it will be $873.00 if you already had a mortgage on the property.
Make sure that your title company is charging the reissue rate on refinances. Many companies were not doing so and it was resolved in the Court system. They have to give you the lower rate.
Again, the costs discussed herein only include the premium and do not include the cost of recording, the title search and other fees charged by the title company.
January 16, 2009
Title Insurance Costs in New York
My prior post described in a nutshell the role of title insurance. But how much does title insurance cost? New York State is divided into 2 zones. I practice in the New York City Area which is considered Zone 2 and includes most of downstate New York and so I will only discuss this zone. Also, please note that in this post I am only discussing the cost of the insurance premium and not of any other cost associated with buying title insurance (such as the cost of the title search and recording fees which I will discuss in later posts).
Title insurance rates are set by the title insurance companies and are published with the NYS Insurance Department. Although the rates are not "regulated" by any governmental agency, title companies cannot deviate from their published rates. Several years ago, most underwriters reduced their rates by 15% after a lawsuit initiated by the NYS Attorney General at the time. I believe that Old Republic did not sign on to this reduction and are still charging the higher rates. If I am incorrect, please let me know so that I can change this post. Regardless, make sure that the company insuring your title signed on to this reduction and if not, switch companies to save the 15%.
As for the rates, they are based on the amount of insurance which is based on the cost of the property or the amount of the loan. The formula if difficult to explain but for illustrative purposes:
a. title insurance for a $200,000.00 house purchase with a mortgage of $160,000.00 will be $1,291.00
b. title insurance for a $500,000.00 with a mortgage of $420,000.00 will be $2,688.00.
c. title insurance for a $1,000,000.00 with a mortgage of $800,000.00 will be $5,439.00
So you see the range of the cost to you depends on the price.
When purchasing a property, the title insurance premium is divided into 2 parts which I combined in the examples above. One part is the title insurance you buy to insure you, the homeowner and the other part, which is considerably cheaper is the lender's title insurance which will be discussed in the next post.
Title insurance rates are set by the title insurance companies and are published with the NYS Insurance Department. Although the rates are not "regulated" by any governmental agency, title companies cannot deviate from their published rates. Several years ago, most underwriters reduced their rates by 15% after a lawsuit initiated by the NYS Attorney General at the time. I believe that Old Republic did not sign on to this reduction and are still charging the higher rates. If I am incorrect, please let me know so that I can change this post. Regardless, make sure that the company insuring your title signed on to this reduction and if not, switch companies to save the 15%.
As for the rates, they are based on the amount of insurance which is based on the cost of the property or the amount of the loan. The formula if difficult to explain but for illustrative purposes:
a. title insurance for a $200,000.00 house purchase with a mortgage of $160,000.00 will be $1,291.00
b. title insurance for a $500,000.00 with a mortgage of $420,000.00 will be $2,688.00.
c. title insurance for a $1,000,000.00 with a mortgage of $800,000.00 will be $5,439.00
So you see the range of the cost to you depends on the price.
When purchasing a property, the title insurance premium is divided into 2 parts which I combined in the examples above. One part is the title insurance you buy to insure you, the homeowner and the other part, which is considerably cheaper is the lender's title insurance which will be discussed in the next post.
January 8, 2009
Title Insurance
Title insurance is a type of insurance that a purchaser of a property (other than a coop which will be discussed later) should buy at the closing of title. This insurance will insure the purchaser's ownership of the property free of any liens, claims or encumbrances. Most people just think it is a fee that has to be paid at closing and is of no significance. In reality, however, it is no different than any other type of insurance in that you buy it and you hope you never have to use it. But if you do have to resort to filing a claim with the insurance company, you will be very thankful that you purchased the insurance (even if at the time you were annoyed to spend the money).
A dramatic example of how title insurance protects a homeowner is as follows. You bought a house from John Doe. As it turns out, John Doe died three years prior to the closing. At the closing, a person with Jon Doe's ID signed the deed and took off with your money. After the closing, the real John Doe's daughter comes to the house and is shocked to see that you moved in to her deceased father's house. If you bought title insurance, and assuming this very simple fact pattern, the title company would be on the hook for making you whole as far as returning to you the money spent to purchase the house. As an aside, you will not be covered for closing costs.
This is a very simple explanation of title insurance and there are many other facets as well as different options of coverage available so if you have any questions, please comment (or email) and I will do my best to reply.
A dramatic example of how title insurance protects a homeowner is as follows. You bought a house from John Doe. As it turns out, John Doe died three years prior to the closing. At the closing, a person with Jon Doe's ID signed the deed and took off with your money. After the closing, the real John Doe's daughter comes to the house and is shocked to see that you moved in to her deceased father's house. If you bought title insurance, and assuming this very simple fact pattern, the title company would be on the hook for making you whole as far as returning to you the money spent to purchase the house. As an aside, you will not be covered for closing costs.
This is a very simple explanation of title insurance and there are many other facets as well as different options of coverage available so if you have any questions, please comment (or email) and I will do my best to reply.
December 16, 2008
Time to refi
Just a note to all home owners that rates are very low and now is probably a good time to refinance. Wells Fargo's website has 30 year fixed mortgages at 5% (with 1 point).
CEMA, rates and bank closing costs
The fact that a CEMA is utilized, either in a refi or a purchase, can have an effect on the interest rate or other bank closing costs. In a residential transaction, the lender pays .25% of the mortgage recording tax. On a loan of $400,000.00, the bank has to shell out $1,000.00 which they would save on if the prior lender assigned its mortgage to your lender. Because the loan costs the bank that much less to close, they are making more money on it. This is one of the many factors that go into the bank's formula when figuring out the rate and costs to charge a borrower. Of course, they are not going to tell you this so it is your duty to bring it up.
I would tell the bank to reduce the rate slightly and once you are rebuffed (most likely) tell them to waive the application fee or processing fee. Explain to them that by doing the deal as a CEMA, they are saving on the mortgage tax that the lender pays so in essence, you are helping them out. Just my opinion, but I am pretty confident that they will waive something to make you happy and close a deal.
I would tell the bank to reduce the rate slightly and once you are rebuffed (most likely) tell them to waive the application fee or processing fee. Explain to them that by doing the deal as a CEMA, they are saving on the mortgage tax that the lender pays so in essence, you are helping them out. Just my opinion, but I am pretty confident that they will waive something to make you happy and close a deal.
December 10, 2008
Mortgage tax credit - save on condo purchase
When a sponsor sells a condominium unit, a purchaser may be entitled to a credit on the NYS Mortgage Recording Tax. There is a complicated formula used to determine the amount of the credit but if the sponsor has a mortgage on the condominium (and unit) which is dated no more than 2 years prior to the sale of the unit, some credit is due to the buyer.
However, sponsors are smart. It has become common practice for the contract of sale of a condominium prepared by a sponsor to state that if any credit is due to the buyer, the buyer will pay that same amount to the sponsor. In effect, what the sponsor is saying is: "you (Buyer) were expecting to pay the full mortgage tax and I don't want to disappoint you, so, whatever you save, you pay to me". The sponsor is right in that the buyer ends up paying the same amount except that a portion is going to the sponsor rather than the State.
As we all know, the current state of the market is such that sponsors need to sell and so as a buyer, there is much more negotiating power than say, 2 years ago. So, when negotiating, give an offer that you are comfortable with but also add that any mortgage tax credit will not be paid to sponsor. This can save you thousands of dollars depending on the circumstances of your transaction.
However, sponsors are smart. It has become common practice for the contract of sale of a condominium prepared by a sponsor to state that if any credit is due to the buyer, the buyer will pay that same amount to the sponsor. In effect, what the sponsor is saying is: "you (Buyer) were expecting to pay the full mortgage tax and I don't want to disappoint you, so, whatever you save, you pay to me". The sponsor is right in that the buyer ends up paying the same amount except that a portion is going to the sponsor rather than the State.
As we all know, the current state of the market is such that sponsors need to sell and so as a buyer, there is much more negotiating power than say, 2 years ago. So, when negotiating, give an offer that you are comfortable with but also add that any mortgage tax credit will not be paid to sponsor. This can save you thousands of dollars depending on the circumstances of your transaction.
November 21, 2008
Coming back soon
I got a little busy over the past month but I will continue posting regularly after Thanksgiving.
I got some new ideas to really spruce up the blog so stay tuned...
I got some new ideas to really spruce up the blog so stay tuned...
October 20, 2008
CEMA
It looks like the CEMA posts are getting the most attention on this site and so I wanted to direct new visitors to my post of September 2, 2008 for a concise tutorial on the NY CEMA process and its benefits to both buyers and sellers.
As mentioned, on refinances of residential properties, CEMAs have been the norm for years for anyone dealing with a reputable mortgage broker. However, most buyers did not pursue this option on purchases even though it would have saved thousands on closing costs.
Comments and questions are welcomed from visitors to this site.
As mentioned, on refinances of residential properties, CEMAs have been the norm for years for anyone dealing with a reputable mortgage broker. However, most buyers did not pursue this option on purchases even though it would have saved thousands on closing costs.
Comments and questions are welcomed from visitors to this site.
October 16, 2008
REO listings
I across this website that has direct links to several banks' REO listings including Fanny, Freddie and Countrywide. I skimmed through them and there are some well priced houses (at least well priced for now). Again from, my experience, you should be able to get a substantial reduction from the listed price.
If you make an offer and your offer is accepted, make sure an attorney reviews the contract. The REO contracts are very tough on purchasers in that often the bank wants the purchaser to pay transfer taxes (which are a seller's charge). Brokers will tell you that this is how it is but you must negotiate this point. The bank will not kill a deal over $3,000.00.
Anyone needing further advise may contact me via email or phone.
If you make an offer and your offer is accepted, make sure an attorney reviews the contract. The REO contracts are very tough on purchasers in that often the bank wants the purchaser to pay transfer taxes (which are a seller's charge). Brokers will tell you that this is how it is but you must negotiate this point. The bank will not kill a deal over $3,000.00.
Anyone needing further advise may contact me via email or phone.
October 14, 2008
REO houses
Due to the rotten state of the real estate market, REO houses, houses owned by banks after the foreclosure have become very attractive buys. I have seen banks accept offers as low as .50 cents on the dollar meaning, if the bank foreclosed on a loan of $450,000.00 and no one purchased the house at the foreclosure auction, the bank will sell that same house at $225,000.00.
You can get listings for REO properties on various websites or through brokers. Some banks have their properties listed on their websites (for example EMC Mortgage's properties are at here). My advise is if you see a REO house that interests you, make whatever offer you want without any shame. What will probably happen is that the lender will negotiate a price with you and maybe you will get a steal in this market. Remember, the bank may very well sit on the house for years and years to come and have already taken a loss on their books.
You can get listings for REO properties on various websites or through brokers. Some banks have their properties listed on their websites (for example EMC Mortgage's properties are at here). My advise is if you see a REO house that interests you, make whatever offer you want without any shame. What will probably happen is that the lender will negotiate a price with you and maybe you will get a steal in this market. Remember, the bank may very well sit on the house for years and years to come and have already taken a loss on their books.
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