Title insurance costs are calculated by multiplying the purchase price of your home by the rate per thousand your insurance company uses. The rate per thousand is a going rate that is used for every thousand dollars that is calculated for the value of your home.
A quick example: if the rate is 0.6% for every thousand, and you bought a $300,000 the title insurance costs would be $1,800.
Other companies, though, may use a bracket-style to calculate their premiers. For example, the percentage per thousand will differ for homes up to $100,000 vs homes with a value of $100,001 to $1,000,000. Other factors will also affect the overall costs, including billed hours towards conducting a title search, examination, and addressing any title defects.
You may be wondering why title insurance costs seem so expensive at the close of sale. Title insurance costs are incorporated into the closing costs of a home and represent a one-time purchase. For this reason, title insurance costs do not fluctuate and can seem expensive to buyers who have just made a very expensive purchase on top of that.
Here are a few examples of situations where title insurance premiums may differ.
Example 1: High-value home purchase
Remember this simple factor: the higher the value of the home, the higher the title insurance cost. Higher value homes will generally be more expensive to insure, whether against title or property.
Home value is generally calculated by using a number of factors, including:
- Comparative market value of the home
- Demand in the market
- Current condition
If you’re purchasing a home with higher value, expect to pay more in title insurance costs.
Example 2: Refinancing a condo and how it’s calculated
Buyers are required by their lender to purchase a new policy when refinancing a condo or property. Typically, your Title Company will offer a discount from the original policy, 20-40% off policy depending on jurisdiction, for a condominium, which is based on the value of the condo as well as the rate per thousand of your insurance company. Talk to your lender and or title company about how much a new policy will cost for your title insurance.