When you’re on the hunt for a new home, your mind is filled with countless details. You excitedly ponder where your new neighbourhood will be and what new furniture you might treat yourself to. One of the last things on your mind is whether or not you should get title insurance. This unglamorous and often forgotten detail can be the most important of all. In this post, we’ll talk about when and why you might need title insurance, as well as answer all of the questions you didn’t know you had.
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What Is Title Insurance in Ontario?
You already know you need home insurance, which will protect you against unforeseen issues like break-ins or damage. Title insurance is different. Your name on the deed is intangible—it’s basically a digital footprint that signifies your ownership of your little slice of paradise.
In a perfect world, this is something that you never have to think about for the entire length of time that you own your home. However, that piece of critical data is also vulnerable to flaws and even outright fraud.
A clerical error or unpaid property taxes could result in an expensive fix that you did not expect. In the worst-case scenario, a fraudster could steal your identity and take ownership of your title without you even knowing about it. They might take loans against your property or even sell the house out from under you.
This doesn’t mean that you’re going to come home one day to find a stranger living in your house, but it could mean that you have a long road of headaches and hassles ahead of you—unless, of course, you have good title insurance to protect you against all of it.
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How Does Title Insurance Work?
To get a better understanding of the importance of title insurance, let’s imagine not having it. Then, it turns out that one of the previous owners of your property failed to pay their property taxes. Normally, this would get caught in the title search. But if something slips through the cracks, you could suddenly find yourself facing a hefty bill to restore your title to good standing.
With title insurance, the same problem could still arise, but you are no longer on your own. You would contact your real estate lawyer, who would then get in touch with the insurance company. If a payment is needed, it is the insurance company that covers the cost. It isn’t just less expensive for you; it is also much less stressful.
Arranging for title insurance is easy at the time of purchase because it is your real estate lawyer’s responsibility as part of the closing process. All you need to do is be sure to communicate your wishes clearly and effectively. Not all title insurance is created equal, and you want to ensure the highest level of protection.
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Types of Title Insurance
If you are taking out a mortgage to purchase your home, there are two types of title insurance that you may need.
Lender’s Title Insurance: This protects the lender against financial loss if a flaw is found in your title. You are the one to cover the cost of the policy; however, it is your financial institution that benefits. Once your mortgage is paid in full, protection from the policy ends.
Homeowner’s Title Insurance: This is an additional, optional policy that protects you—the homeowner—from any flaws found in the title that existed before your transaction closed, and the policy is in effect for the entire time you own the home.
Is Title Insurance Mandatory in Ontario?
Technically speaking, title insurance is not legally necessary. Your lender may require it in order to approve your loan. However, it is a very small price to pay for the peace of mind that goes along with it.
In other words, it may not be mandatory. It’s simply so highly recommended that it may as well be.
Who Pays for Title Insurance?
The buyer is usually the one to cover the cost of title insurance. This includes both the homeowner’s policy and the lender’s title insurance, if applicable.
What Does Title Insurance Cover in Ontario?
Title insurance protects you and your lender against a host of invisible but stressful and expensive flaws. These can include:
- Liens on the property from previous owners, such as unpaid taxes, mortgages, or other municipal charges
- Title fraud, such as loans taken out in your name or someone pretending to be the homeowner and offering the property for sale
- Claims by missing heirs seeking their share or interest in the property
- Errors or omissions in public records or surveys
What Does Title Insurance Not Cover
No one policy can protect you from every issue under the sun. Some exceptions to title insurance include:
- Issues that arise after your policy is effective
- Known defects when you signed the Agreement of Purchase and Sale
- Physical defects in the property itself undisclosed at the time of sale
Where to Buy Title Insurance in Ontario
When buying a home, your real estate lawyer will attend to the details of finding and securing a suitable policy for you. You’ll want to discuss with them the level of quality and protection that you are looking for to ensure that they don’t just give you the bare minimum.
In addition, let them know that you want a homeowner’s policy in addition to any lender’s policy that may be required. What about after you move in? Not every provider offers post-closing insurance, but it is worth looking into.
The easiest way is to get in touch with your real estate lawyer about adding a policy to your title. Otherwise, you can contact providers directly.
How Much Is Title Insurance in Ontario?
The cost of title insurance can vary depending on a variety of factors, including the provider, the extent of the coverage, and the type of property that you are purchasing. Plans can range from approximately $250 to over $800.
No matter which type of policy you obtain, title insurance is a one-time purchase. Once you have secured it, there are no monthly premiums or other hidden costs.
Looking for more great tips and advice before buying your house? Check out the posts below:
- Home Inspection Checklist for Buyers
- Whatever Happened to the First-Time Home Buyer Incentive in Canada?
- Tips for Buying a Second Home
Is Title Insurance Worth It?
Like any insurance policy, you will hopefully never need to make a claim, which can make it seem like an unnecessary expense. You might find yourself thinking that money is better spent hiring a painter or finding a perfect piece of décor.
If you need help, you will be grateful that you invested in this protection. Financial and administrative errors are rare, but they do happen. Fortunately, real estate fraud is even more rare, but do you really want to take the chance?. Without insurance, you might end up spending thousands of dollars and months in court trying to clear your title.
A comprehensive policy doesn’t just safeguard your peace of mind right now. If you ever decide to sell your house later, a clean title will go a long way toward a high resale value and a satisfactory outcome.
Do you have more questions about buying or selling a house? Our Peterborough real estate agents are here for you every step of the way. Reach out to team@jeffandkatie.ca or call 705-243-9797 to start a conversation.
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