I am often asked by clients about the real value of title insurance, why they need to have and pay for it. Whether you are a home buyer or a home owner simply refinancing the mortgage on your home, you will need title insurance. Once I explain the reason and need for title insurance, the majority of home owners accept the cost and see the real value of title insurance.
Title insurance includes a lender portion policy and the homeowner has the option to add a Homeowner Policy portion.
Lenders request the insurance to protect against title fraud and the high costs associated with this growing crime. However, there are more benefits to this insurance for the homeowner.
The policy transfers risks related to title of the property from the home buyer to title insurance provider. So if any delays or issues occur on title during the purchase, the insurance provider will resolve it and the associated costs.
The Homeowner Policy also covers losses associated with survey issues and title defects that existed prior to the home purchase as well as title fraud occurring after the policy is issued. Coverage continues after the purchase for as long as the owners own the home. Title insurance covers losses resulting from many risks not directly related to title, such as: structures or renovations previously completed without required permits, unknown work orders, encroachments, liens, zoning and by-law violations.
The policy protects the homeowner against any future title fraud on the property. For properties that are clear title with no mortgage, there is a risk that a criminal can assign a mortgage against that property without the owner’s knowledge. They take the money and run leaving the homeowner with a mortgage and payments.
Who is at risk?
The easiest target is the homeowner with no existing mortgage. However, even a property owner with a mortgage can become a victim. In both cases, mortgage funds are usually sent to a third party and are often unrecoverable. For this reason, lenders want homeowners to acquire title insurance to transfer the cost to fight the case and cover the costs to the title insurance provider.
What can the homeowner expect if they are a victim of title fraud?
The immediate issue for homeowners in a real estate title fraud situation is the homeowner is responsible to prove the crime occurred. During that time they could be responsible for a mortgage and the payments. If unpaid, this can result in foreclosure by the lender and a record of the late payments on the owner’s credit report.
If you become a victim in a real estate title fraud, it can take considerable time and money such as:
Costs for legal fees to show proof you are the victim
Lost opportunities to sell or buy another property
Possibility of losing your home to foreclosure by the lender
Title insurance covers the legal expenses and many other costs related to restoring title in cases of real estate title fraud.
For homeowners who did not obtain title insurance when they bought their home, the protection title insurance can be purchased any time.
If you are buying a home, your Dominion Lending Centres mortgage professional and your lawyer will discuss title insurance with you. If you are a current homeowner who wishes to obtain title insurance, contact your lawyer or a title insurance company. Fees range depending on the value of the property.