SCHUTT LAW FIRM, P.A.
Phone: 239.540.7007
Title Insurance
09/14/2015

Understand Adjustable Rate and Fixed Rate Mortgages

While there are other more exotic loan products available, a potential borrower's main decision will come down to choosing between an adjustable or fixed interest rate on their loan.  So what is the difference?  And what are the advantages/disadvantages of each?  Below we will answer those questions for you, and hopefully with this information your decision will become a little easier.

Adjustable Rate Mortgage

An adjustable rate mortgage, or ARM, is a loan with a variable interest rate.  The monthly interest rate will be determined by using a base index (one year US Treasury Bills, for example) and adding to it a predetermined margin.  Thus, as the underlying index fluctuates, so will the interest rate on your loan.

ARM - Advantages and Disadvantages

The advantages of an ARM are that they generally offer a discounted introductory rate for a number of years.  This means that  a borrower can afford a larger mortgage as the early years of the loan will require smaller payments.  Also, if interest rates drop, the mortgage rate drops right along with them.  This way, the borrower immediately realizes the financial benefit, without having to refinance the loan. The disadvantages of an ARM are that they are unpredictable and if interest rates rise, so do your loan payments.  Sometimes, the increase can be dramatic.  Also, some ARMs have such low introductory rates that negative amortization can occur, which means the loan balance can rise above the original amount borrowed.

Fixed Rate Mortgage - Advantages and Disadvantages

The fixed rate mortgage finds its main advantage in the form of peace of mind.  The interest rate and payments will not change over the life of the loan, so budgeting and monitoring your finances is made easier.  They are also quite easy to understand, and for this reason are better for a first time home buyer or less sophisticated buyer. The disadvantages of a fixed rate mortgage are mainly tied to the inability to change the interest rate without a refinance.  If rates see a significant drop, a fixed rate mortgagee will have to refinance their loan in order to take advantage.  This means going through the entire loan approval process once again, and paying significant closing costs.  The lack of any discount early on also makes fixed rate mortgages unaffordable for some.

Title Insurance in Fort Myers, Florida

Taking out a mortgage signifies a large investment on the part of the homebuyer.  The average mortgagee is committing to the repayment of a six figure debt over the course of 30 years.  In order to properly protect such an important investment, title insurance in Fort Myers is key.  At Schutt Law Firm, our experienced professionals can guide you through the ins and outs of a title insurance policy, and make you feel at ease with the entire closing process.  Don't trust such an important transaction to just anyone--give us a call today at (239) 540-7007.
WHY TITLE INSURANCE?
Owning real estate is one of the most precious values of freedom in this country. You want the assurance that the property you are buying will be yours. Other than your mortgage holder, no one else should have any claims or restrictions against your home.

Title insurance is issued after a careful examination of the public records. But even the most thorough search cannot absolutely assure that no title faults are present, despite the knowledge and experience of professional title examiners. In addition to matters shown by public records, other title problems may exist that cannot be disclosed in a search. Title insurance eliminates any risks and losses caused by faults in title from an event that occurred before you owned the property.

Title insurance is different from other types of insurance in that it protects you, the insured, from a loss that may occur from matters or faults from the past. Other types of insurance such as auto, life, or health cover you against losses that may occur in the future. Title insurance does not protect against any future faults, but does protect you from risks or undiscovered interests. Another difference is that you pay a one-time premium for a policy that remains effective until the property is sold to a new owner - even if that doesn't occur for decades.
What is a Lender's Policy?

A lender's policy, also known as a loan policy or a mortgage policy, protects the lender against loss due to unknown title defects. It also protects the lender's interest from certain matters which may exist, but may not be known at the time of the sale.

This policy only protects the lender's interest. It does not protect the purchaser. That is why a real estate purchaser needs an owner's policy.
What is an owner's policy?

An owner's policy protects you, the purchaser, against a loss that may occur from a fault in the ownership or interest you have in the property. You should protect the equity in your new home with a title policy.

What does an owner's policy provide?

- Protection from financial loss due to demands that may be charged against the title to your home, up to the cost of the title policy.
- Payment of legal costs if the title insurer has to defend your title against a covered claim.
- Payment of successful claims against the title to your home covered by the policy, up to the cost of the policy.
Why the seller needs to provide title insurance?

Any purchaser will need evidence that his investment in your property is free of title defects. The title insurance policy that you provide the purchaser is a guarantee that you are selling a clear title to your real estate, unencumbered by any legal attachments that might limit or jeopardize ownership. It will reassure your purchaser that he or she is protected from any risks or losses and could help you close your deal.
Why the buyer needs title insurance?

Without title insurance, you may not be fully protected against errors in public records, hidden defects not disclosed by the public records, or mistakes in examination of the title. As a result, you may be held fully accountable for any prior liens, judgments or claims brought against your new property. If this should occur, your title policy insures that you will be defended at no cost against all covered claims up to the amount of the policy.
How much does title insurance cost?

The insurance commission approves and controls the premiums for title insurance policies. The premiums are paid only once and the cost depends upon the purchase price of the property and the policy amount must be equal to the purchase price.
What does title insurance protect from?
  • Fraud
  • Adverse possession
  • Rights of divorced parties
  • Deeds by minors
  • Undisclosed Heirs
  • Errors in tax records
  • False affidavits of death or heirshipProbate matters
  • Deeds and wills by persons of unsound mind
  • Conveyances by undisclosed divorced spouses
  • Forfeitures of real property due to criminal acts
  • Deeds by persons falsely representing their marital status
  • Documents executed by a revoked or expired Power of Attorney
  • Defective acknowledgements due to improper or expired notarization
  • Mistakes and omissions resulting in improper abstracting
  • Forged deeds, mortgages, wills, releases and other documents
  • False impersonation of the true land owner