The Truth Behind Title Insurance
You’ve been told that title insurance is optional, but important, but before you shell out the money, it’s necessary to know what it is, and why you need it. A lot of people over look it as an ‘additional cost’ when they are settling their closing fees with the lawyer. But don’t just sign off on it without know what it does. Title Insurance is an important part of the process, and designed specifically to ensure that the buyer of the new home (the person who is now assuming the ‘title’) is protected from a number of unforeseen circumstances, which can lead to financial loss, unless they are protected.
At the time of closing, your lawyer is going to list “Title Search” and “Title Insurance” as part of your costs. Both are an integral part of the home buying process and I would highly recommend all my clients to ensure that it’s something their lawyer is taking care of. Title search is the process of retrieving documents which give you the history of a property, and verify details concerning the property.
When someone is buying a home, a title search is performed primarily to answer three questions:
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Does the seller have a saleable interest in the property?
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What kind of restrictions or allowances pertain to the use of the land?
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Do any liens exist on the property which need to be paid off at closing? These would be any circumstances where the property is being held in place of a debt.
Once the title search is complete, and you have a clean bill to go with, it’s essential to consider getting yourself title insurance. Title insurance is an insurance policy that protects residential or commercial
property owners and their lenders against losses related to the property’s ownership. Title insurance will also protect you against title fraud, which is a form of real estate fraud that harms individual home owners and lenders. It typically involves a fraudster using stolen personal information, or forged documents to transfer your home’s title to him/herself, without your knowledge. The fraudster can then apply for a mortgage on your home and disappear once he has the money. Let title insurance protect you, and your investment. It’s paid in as a onetime premium which usually amounts to a couple hundred dollar, based on the property value. In return, it offers you incredible peace of mind, knowing that your investment in this new home is protected from fraud, encroachment and over all security of land ownership.
As part of the insurance package, you will be entitled to protection against losses which include:
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Title defects, which may include issues that prevent you from having clear ownership of the property
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Existing liens against the property’s title. For example, unpaid debts from utilities, mortgages, property taxes or condominium charges secured against the property.
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Encroachment issues, which include structure on your property that needs to be removed because it is on your neighbour’s property.
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Title fraud
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Errors in surveys and public records
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Other title related issues that can affect your ability to sell, mortgage, or lease your property in the future.
Your title insurance policy will protect you as long as you own your property, and will cover losses up to the maximum coverage set out in the policy. It may also cover most legal expenses related to restoring your property’s title if the need arises.
What your title insurance doesn’t do… is to insure your home against theft, damage, and general wear and tear. It also doesn’t include known title defects, environmental hazards, and law violations from changes, renovations or additions to your property or land that you are responsible for creating.
When you are taking that important step towards home ownership, this additional cost is something that can save you incredible hassle in the future. So protect yourself, and protect your investment, ensure that your home really belongs to you.
If you have questions about title insurance, and why we need it, please give me a call and I would be happy to explain it to you!