Before knowing what title insurance is, you will need to know what the term ‘title’ implies. The title refers to the legal ownership of a property. When the legal owner signs the deed stating the property transfer, you will get the title or legal ownership of the property. Title insurance protects the owner and buyers of a property by covering the losses incurred by a third party. There are different types of title insurance. One of the most common types of Home title insurance in Ontario is lender’s title insurance, the purpose of which is to protect the lender. The insurance has to be purchased by the borrower to be covered.
What is Title Insurance?
The title is necessary to conduct a real estate transaction effectively. Title companies are responsible for checking any defects associated with the property’s title. These defects are liens, encumbrances, and easements. Home title insurance protects the lenders and buyers of a home against such defects. These defects may affect the rights of property vested in the buyer and owner and have been mentioned below :
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- Liens : These can be imposed by the contractor, tax authority, or lender when they have not been paid the consideration.
- Easement : An easement is a type of right someone enjoys to use someone else’s property. The person who wants easement rights may not be the property owner.
- Encumbrances : These are the combination of both lien and easement. It is a covenant imposed by the association of homeowners and leaseholders.
The title company also conducts the examination or search of a mortgage, divorce decrees, court judgments, tax records, etc. Lastly, the title company resolves the problem arising out of the investigations.
Various Types of Title Insurance
Title insurance can mainly be divided into two types. These are the lender’s title insurance and the owner’s title insurance.
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Lender’s Title Insurance
The lender’s Home Title insurance in Ontario protects the interest of the company that issues a mortgage. It ensures the lenders have claims on the property. The borrower has to purchase the lender’s title to protect the lender. This insurance helped the lender when the seller was not in a position to transfer the ownership of the property. It is applicable in the case of both home title and real estate title insurance.
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Owner’s Title Insurance
The owner’s title insurance protects the buyer of a home. This title insurance is considered when you own the home. The insurance coverage amount is equal to the buying price and will remain the same as long as the heirs own the home. Owner’s title insurance is essential if you want to spend a longer period in your home.
The Usefulness of a Title Insurance
An owner’s title insurance plays an important role in paying off the lien, which was not discovered earlier. It also protects an owner of a property from a seller who sells the property fraudulently without real ownership. Finally, this insurance protects you when you must sell the home one day. Title insurance does not have the responsibility to protect homeowners against infringement. In simple words, title insurance does not protect you against the problems that arise after buying the property. It protects you only against those problems that would have affected your decision to buy the property.
For example- A has lost his home as it was sold to A fraudulently. Consequently, A has stopped paying the mortgage. Then the lender can make a claim with the help of its title insurance company to compensate for the mortgage payment.
Expenses of Title Insurance
Home Title insurance in Ontario is a one-time investment. The expenses do not continue for a longer period. As a result, title insurance prices vary from company to company and state to state. But in some states, title insurance costs are the same irrespective of the insurance company. It depends on which title insurance company you want to choose. You may take the suggestions of the seller or your real estate agent. But it is based on your decision if you wish to stick to their requests or do your research. You can also take the recommendation of a lender as their financial interests will conform to yours.
You can search online to find the home title insurance company. There is the advanced search function facility, which helps you find a good title insurance company. You should conduct adequate research before deciding to choose an insurance company. You should check the company’s strength rating and reputation to select a genuine title insurance company.
Required Needs for Title Insurance
The lender’s Home title insurance in Ontario is compulsory, whereas the owner’s title insurance is not required; it’s optional. An owner’s policy protects your right to live in the home. An owner’s title policy can protect you against:
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- Disputes between boundaries
- A mistake on the deed of the property
- Errors in the survey of the property
- Arising conflict in wills
- If a claim arises out of forged power of attorney
- Encroachment
- Unpaid child support of a former owner
- Violations of code by a previous owner
- If the documents have been recorded improperly
The Consequence of the Absence of a Title Insurance
If there is no title insurance, the parties involved in the transaction may be at risk if the title has some defects. For example, suppose a person has bought a home unaware of the unpaid taxes due from the previous owner. Without title insurance, the buyer will have to pay the whole amount of taxes. But title insurance will save the buyer by insuring the title. In addition, title insurance protects the buyer until he has an interest in the property or owns the property.
On the other hand, the lender’s title insurance protects the lender of the mortgage and reimburses the amount that arises from unrecorded liens, unrecorded rights, and other defects of title. If any issue arises with the property’s title due to the borrower’s default, the lender would be protected till the payment of the mortgage amount. If a buyer purchases the owner’s home title insurance, he will be protected against some unpredictable claims arising out of the title. The real investor must ensure that the title does not have any defects.
Title insurance covers the following things.
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- Unknown defects in the title
- Mortgages, property taxes, utility bills, property taxes, condominium charges
- Issues in the encroachments
- Errors in the survey of the property and public record
- Fraudulent title
- Title-related problems that affect the sale, mortgage, or lease of your property
Requirement of Home Title Insurance Ontario
Home Title insurance in Ontario is optional. However, if you buy a home or a commercial property, you will be recommended to purchase Home title insurance in Ontario is a requirement of the mortgage lender. Since this insurance protects residential or commercial property owners and lenders, title insurance is required. Many companies help you buy title insurance in Ontario.
Residential Title Insurance
Residential title insurance can be purchased when purchasing the home or after purchasing it. There is little difference in the policies of existing homeowners and new homeowners. To buy a residential title insurance company, you can get the help of a lawyer, title insurance company, insurance agent, or broker.
The cost of residential title insurance depends on the value of your property and the company you choose. It will protect you against the defective title as long as you own the property. However, most residential title insurance policies also cover:
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- Your heirs, if you transfer the property by will
- A spouse at the time of divorce
- Children
The coverage provided by residential title insurance can be divided into the following categories:
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- Survey Coverage : It protects your property against the new survey of your property. As a result, many lenders accept it as an alternative to surveys.
- Gap Coverage : It covers the gap between the purchase of your property and the complete registration.
- Legal Coverage : It covers the legal expenses arising from the property. So, for example, if you have to defend the title of your home, you will be covered under this category.
- Comprehensive Coverage : This coverage protects the title of your property. It also covers you against other persons’ negligence, including professionals like lawyers.
What is Not Covered by Title Insurance?
Before buying Home title insurance in Ontario, you should be aware of the following exclusion.
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- If you are aware of the defects of the title at the time of purchasing your property
- Natural calamity
- Problems found after the new survey of the property
- Issues not listed on public records
Conclusion
Title insurance protects you against some defects associated with the title of your property. Unfortunately, many people have to take a risk after purchasing if there is any defect in the title. But title insurance can reimburse you and protect you against suffering such a loss. Although owner’s title insurance is not compulsory, it would help by having both lender’s title insurance and owner’s title insurance. You can even get the help of a professional while buying some title insurance policies like residential title insurance. You won’t have to worry while purchasing a property in the event of title insurance. But you should check the policy before buying one to know what type of problem the policy covers.
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Frequently Asked Question (FAQs)
Title insurance protects buyers and lenders against defective titles. Therefore, you can buy title insurance to get protection against title defects.
You can protect your home from title fraud by securing your personal information and other home details. It would help if you were careful while providing any information online.
In Canada, ownership of a property is proved by the registration of a document in the land registry of the territory. In some provinces of Canada, the registered document is known as a certificate of land title.
The home title is stolen when someone fraudulently transfers the title of a property without the real owner's knowledge.
The real estate owner or the lender needs title insurance. Title insurance protects the owner and lender against property damage due to defects in the title.
Both commercial and residential properties can have title insurance. Should I purchase title insurance when I buy a house?
How do you protect your home from title fraud?
What documents prove property ownership in Canada?
Can someone steal your home title?
Who needs title insurance
What types of properties can have title insurance?
