How Much Does Title Insurance Cost in Texas?

Title insurance plays a significant role in real estate transactions by safeguarding property owners and lenders against financial losses stemming from defects in a property’s title that originated before the purchase. This protection is particularly important in Texas, where real estate transactions involve distinct processes and regulations. Understanding the associated costs of this insurance is essential for anyone involved in buying or selling property within the state.

Texas Title Insurance Premium Calculation

In Texas, the cost of title insurance premiums is set by the Texas Department of Insurance (TDI). This makes Texas a “promulgated rate” state, ensuring consistent maximum rates across providers for comparable coverage. These rates are subject to occasional adjustments by the TDI, which considers various factors, including real estate market conditions.

The premium for a title insurance policy is calculated based on the property’s sales price for an owner’s policy or the loan amount for a loan policy. A tiered rate structure applies, meaning that while higher property values result in higher overall premiums, the rate per dollar often decreases as the value increases. For instance, a $100,000 property might have an owner’s policy cost around $832, whereas a $200,000 property’s policy could be approximately $1,359. A property valued at $400,000 might incur a premium of about $2,413.

For policies exceeding $100,000, a specific calculation method is utilized, involving a base amount plus a per-dollar rate for the value above the threshold. For example, a policy for $268,500 would involve subtracting $100,000, multiplying the remainder by a specific rate (e.g., 0.00527), and then adding a fixed amount (e.g., $832) to arrive at the final premium. This structured approach ensures transparency in how the base premium is derived for various property values.

Owner’s Policy and Loan Policy Costs

Two primary types of title insurance policies are commonly issued in Texas real estate transactions: the owner’s policy and the loan policy. Each serves a distinct purpose and carries a separate premium. The owner’s policy is designed to protect the buyer’s equity interest in the property, covering potential losses due to title defects that existed before the purchase date. Securing an owner’s policy is recommended for buyers to safeguard their investment. The coverage amount for an owner’s policy is equivalent to the property’s purchase price, and its cost is determined by the TDI’s promulgated rate schedule based on this value.

A loan policy is required by mortgage lenders. This policy protects the lender’s financial interest in the property for the duration of the loan, insuring against title defects up to the outstanding loan amount. The premium for a loan policy is calculated using the TDI’s rate schedule, applied to the loan amount. When both an owner’s policy and a loan policy are issued concurrently in the same transaction and cover the same land, a simultaneous issue discount applies. This results in a significantly reduced premium for the loan policy.

Endorsements and Credits Affecting Total Cost

Beyond the basic premium, the total cost of title insurance can be influenced by additional coverages known as endorsements. Endorsements are additions to a title insurance policy that provide specialized protection against specific risks not covered by the standard policy. For example, common endorsements include those for survey coverage, restrictive covenants, mineral rights, or planned unit developments. These additions come with their own separate fees, which are added to the base premium.

Lenders frequently require certain endorsements to further protect their interests, such as those related to environmental liens (T-36) or tax deletion (T-30). The cost of endorsements can vary; for instance, a Restrictions, Encroachments, and Minerals Endorsement (T-19.1) on residential property might cost 5% or 10% of the basic rate, depending on whether it’s purchased with survey deletion.

Conversely, reissue credits can reduce the cost of an owner’s policy. A reissue credit is a discount applied to the premium if the property was previously insured and certain conditions are met. For refinance transactions, a specific credit may apply if the new loan takes up an existing, insured lien.

If a property is refinanced within four years of its previous policy, a 50% credit on the new loan policy’s premium may be applied. If the refinance occurs between four and eight years, a 25% credit is often available. This credit aims to recognize that some of the title examination work has already been completed, thus reducing the cost for the consumer.

Common Practices for Paying Title Insurance

The responsibility for paying title insurance premiums in Texas is a negotiable aspect of the real estate transaction. Customary practices have emerged regarding who covers which policy. In Texas, it is common for the seller to pay for the owner’s title insurance policy. This practice stems from the seller’s obligation to deliver a clear and marketable title to the buyer, free from undisclosed encumbrances or defects.

Conversely, the buyer is responsible for paying the premium for the loan policy, which is a requirement imposed by their mortgage lender. Any endorsements specifically requested by the buyer or their lender are also paid by the buyer. These payment allocations are outlined in the purchase contract. However, market conditions can influence these customs; in competitive seller’s markets, buyers might agree to pay for both the owner’s and lender’s policies to strengthen their offer.