Under what circumstance are lenders likely to require owners to purchase a new loan title policy?

Lenders are likely to require owners to purchase a new loan title policy when they refinance. This is because refinancing involves taking out a new mortgage to replace the existing one, and the lender wants to ensure their security interest in the property is adequately protected. A new loan title policy provides a fresh title search and insurance against any potential title issues that might have arisen since the original policy was issued, which could affect the lender's rights to the property.

In the refinancing process, the lender assesses the current condition of the title to confirm that there are no liens, claims, or other encumbrances that could jeopardize their investment. A new title policy thus minimizes the risk to the lender and assures them that there are no unresolved title disputes that could come to light after the new loan is established.

In contrast, selling a property or transferring title to a family member does not inherently require a new loan title policy since these transactions do not involve the establishment of a new loan. Similarly, buying additional property may not require a new policy if the financing arrangements are different or the original title coverage is still applicable. Therefore, refinancing distinctly necessitates the acquisition of a new loan title policy to guarantee that the lender is adequately protected.