What is the primary purpose of title insurance in mortgage transactions?

The primary purpose of title insurance in mortgage transactions is to protect against financial loss from defects in the title to the property. Title insurance provides coverage for potential issues that may arise, such as liens, encumbrances, or ownership disputes that were not identified during the title search. This is crucial because these defects can significantly affect the ability of the buyer to secure clear ownership or diminish the property's value.

When a lender issues a mortgage, it typically requires the borrower to obtain title insurance as part of the closing process. This insurance not only safeguards the lender's investment but also offers buyers peace of mind, knowing they are protected from unforeseen problems related to the title.

Other options, such as ensuring property value increases over time, guaranteeing the lowest possible interest rate, or facilitating a quick sale, do not align with the fundamental role of title insurance, which is to mitigate risk related to the property title itself. Title insurance does not influence market conditions or financing terms, making it distinct and essential in real estate transactions.