Title insurance operates only as long as an individual retains an interest in property and the obligation of the insurer is then terminated on the alienation of that interest.

When a mortgage is refinanced, the full debt to the mortgagee is satisfied along with any penalty rates for early repayment and administration costs that may be associated with refinancing.

Therefore a previous financial relationship is terminated and a new one created. In terms of interests held, the old mortgagee will provide a release of mortgage to be registered so as to clear its interest from the title, and herein lies the fact that the mortgagor too has terminated one interest and created a new interest, albeit constructive and with a party of alternate identity.
It is for this reason that title insurance for refinancing a mortgage needs to be repurchased.

Apart from the need for careful evaluation in regard to the objective of the refinancing measure, and the advantage envisaged by such a transaction, the mortgagor will need to bear in mind the many costs that present themselves when refinancing a mortgage, including that of title insurance.

It would be a rare event for a mortgagee to waive the requirement of mortgagee’s title insurance, and while it may acquire this protection itself, it would be naïve for the mortgagor to believe that the cost of this title insurance when refinancing is not reflected in the price of the financial product offered.

The reason why an additional charge of title insurance exists on refinancing is primarily due to the creation of a fresh interest.
In addition the mortgagor will require owner’s title insurance to protect against the risks previously covered.

Failure to remain insured at this point would be a lack of good sense as any advantage gained by the refinancing itself could easily be overshadowed by an adverse claim on the title to the property. Essentially the same diligence needs to be applied to the acquisition of a fresh title insurance policy.

Notably, title insurance insures against an error on the part of the title insurer when initially searching and declaring the title clear of defects. A standard policy, unless specifically stipulated or in extended coverage, may not cover fraud or against the defects in the title that were found at first instance.

The refinancing of mortgages comprise approximately 30% of all new mortgages, and therefore, considering that title insurance only survives till the termination of an interest in property, provide ample fodder for the title insurance industry as well.

It Better be Worth It

If a mortgagor is considering title insurance refinancing, in addition to the obvious calculation in regard to the utility of the decision, it is necessary for arrangements to be made before hand to ensure the timely and accurate execution of documents by professionals and service providers.

This will most often be in regard to accurate pay out figures and precise collocation of funds to the various recipients that will expect payment on refinancing, and will greatly reduce the incidence of risk.

Still, with the advent of faster and more efficient electronic banking, the contingencies of yesteryear that plagued the conveyance and refinancing individual serve to be merely a memory.

Given the rampant competition that exists in both the title insurance market and also the mortgage sector, the provision of quality service in this regard ought to be easily achieved.

Resources:

http://www.studyatuq.net/basics-mortgage-refinancing

http://ezinearticles.com/?Mortgage-Refinance:-Save-Money-on-Your-New-Title-Insurance-Policy&id=299172

http://www.mrmortgage.com.au/american-first-title.htm