What are Refinance Credits?
The Texas Department of Insurance (TDI) provides this definition in Section III, R-8 of the Basic Manual of Title Insurance:
“When a Loan Policy is issued on a loan that fully takes up, renews, extends, or satisfies one or more existing liens that are already insured by one or more existing Loan Policies, the new Loan Policy must be in the amount of the note of the new loan. The premium for the new Loan Policy is reduced by a credit.”
For those of us who aren’t veteran escrow officers, think of refinance credits like this:
If you refinance your home loan with a better interest rate to the point that the old loan is totally covered by the amount of the new one, then you should receive some money back on the title insurance you purchased for the initial loan.
Refinance credits are designed to give you control over your mortgage and finances. It is an incentive to look out for the best possible rates and terms under which you can refinance your loan.
What are the Current Rates in Texas?
According to the TDI, you can determine the potential amount of your refinance credits in two steps:
- Calculate the difference in premium between the new, refinanced loan and the original loan; and
- Multiply by the applicable percentage below, with the time representing the number of years from the existing loan date to the new loan date:
- 50% when four years or less; or
- 25% when more than four years but less than eight years.
Or to use simpler language:
If you refinance your property within 8 years of purchasing it or your previous refinancing, you can earn a credit of up to 50% off your title insurance premium.
Instituted in late 2019, this two-tier rate structure represents a dramatic improvement over the older six-tier model. It is consumer friendly in both ease of understanding of what’s happening and the rate structure itself.
What Does This Mean for Me as a Homeowner?
Think of refinance credits as a reward for being an invested homeowner who’s watched interest rates ever since you bought your home in hopes of making prudent decisions for your future.
Additionally, since all title companies are subject to the same rules, rates, and fee structures for title insurance, they can’t confuse you with legalese and price comparison mumbo-jumbo. Instead, they have to focus on actually treating you like a person by explaining all of this industry-insider information in terms you can understand.
If you’re thinking of refinancing your home and want help understanding if you’re eligible for title insurance refinance credit, contact Patten TItle today.