What is title insurance?

Title insurance is insurance that protects against losses from defects in your title—the legal ownership of your property. These defects can include issues with the property survey, the registration of your land title and problems you didn’t know you inherited from a previous owner, like back taxes or improper renovations. Title defects are unpredictable and expensive, but title insurance lets homeowners protect themselves.

Are title insurance and home insurance the same thing?

It’s common to confuse home insurance with title insurance, or to assume because you have home insurance, you’re fully protected. But they cover completely separate risks, and even their premiums work differently.

Home insurance deals with your home’s physical structure, and the items inside it. Title insurance deals with your legal ownership of the property, even if it’s an empty lot. Home insurance covers potential future physical damage to the home, or losses to replace stolen insured items. Title insurance covers (apart from future fraud) losses from issues that already existed, but that you didn’t know about.

Here’s a classic example of the difference:

• Are you out money because your shed flooded or got broken into? You may be covered by home insurance.
• Are you out money because the shed turned out to be on your neighbour’s land (a mistake by the surveyor) and you had to move it? That may be a title insurance claim.

What does title insurance cover?

Most title insurance policies covers losses from problems that already exist but that you don’t know about.

• If the survey for your property wasn’t done correctly, you won’t know until you’re forced to move the shed you unwittingly built on your neighbour’s land.
• If the previous owner of your home did renovations without a permit, you won’t know until the city forces you to bring your home up to code.
• If the previous owner left taxes on the property unpaid, or there were taxes that weren’t addressed or correctly levied on the property when the deal closed, you won’t know until the government comes looking for those back taxes.

Title insurance may cover your losses in each of these scenarios, and many more. Another notable point of coverage is title fraud—a thief using your identity to borrow money against your home, or even sell it out from under you.

What doesn’t title insurance cover?

It’s important to remember title insurance coverage often depends on whether or not an issue was known about when you bought the policy. While you can always get owner’s title insurance at any time, it’s best to get your policy as you’re buying the house. That way, any issues you learn about afterward can fall under its umbrella—coverage almost never applies to title defects you knew about before getting the policy. There are some instances where title insurance can still protect you from a known title defect, but it’s important to ask your lawyer or notary.

Title insurance covers the legal existence of your property, not the property itself. The losses it covers will often originate from something physical—moving a shed, bringing your home up to code—but the coverage comes from the title defect that led you to be responsible for the cost, not the issue that incurred the cost.

Here’s a quick example: A couple finds a leak in their roof and has to pay to have it repaired, as well as fixing the water damage the leak caused before it was discovered. Does title insurance apply?

• It can, if the previous owner had done work involving that roof without a permit. The covered risk is from the previous owner’s lack of a permit, not the possibility the roof might leak.
• If the previous work had a permit, or if the old owner never did work on the roof, title insurance unfortunately can’t cover the losses from repairing it.

The most common coverage confusion we see comes from this perceived grey area between home and title insurance. Just because the builder or previous owner did a shoddy job doesn’t always mean title insurance can cover the losses. When the government makes you bring a previous owner’s build up to code, always verify if the work was properly permitted—if it wasn’t, your next call should be to your title insurer to make a claim.

If your neighbor makes a claim against you, for instance alleging your new garage extension encroaches on their property, the issue title insurance checks for is the property survey, not the garage itself.

Is title insurance part of western protocol?

Western Conveyancing Protocol (also called WCP or the Protocol) is a system the law societies in the Western provinces created to help close real estate deals faster. A Protocol closing lets the deal “close” on the closing date, even though the land title registration hasn’t happened yet. The seller can get their money and the buyer can move in without waiting weeks for the title registry.

Title insurance is separate from WCP. It offers all of the same benefits—fast closing, registration gap coverage—with much more protection for the buyer. More notaries and lawyers are relying on title insurance to cover the gaps in WCP coverage and make sure you’re properly protected, especially in hotter markets like Vancouver or Calgary.

*This post previously appeared on the Dominion Lending Centres Our House Blog

Did you know? Close to 70 percent of mortgages never make it to the end of their term! This means that, for a variety of reasons, homeowners are ending their mortgages early. However, that still leaves a solid 30 percent of home buyers who keep their mortgage until the term is up and it is time to renew!

If you are not planning to move in the near future and are happy with your current mortgage, you are likely one of the 30 percent who will renew once the term ends. So what does this process look like?

When it comes time to renew your mortgage, most lenders will send you a renewal letter when there is around 3 months remaining on your term. While nearly 60 percent of borrowers simply sign and send back their renewal without ever shopping around for a more favorable interest rate, this is actually the best time to check out your options.

Most standard terms are 5-year terms and, with that much time has passed since signing, the market rates could be very different once the term is up! Despite this, lenders tend to provide higher rates on renewals versus new clients as they are hoping that the ease of renewal will prevent you from seeking out new rates. However, shopping around for a better rate is not as difficult as it sounds – especially with the help of a mortgage broker – and it could end up saving you a couple of hundred dollars a month (depending on your situation)! Ideally, you should be keeping track of your own mortgage term end date as shopping for a new rate between four and six months before your expiry will ensure you are able to find the most affordable option for you.

After shopping around, you may find that your bank is actually offering a great rate – in which case you can simply submit the renewal! But if you are able to seek out a lower rate, we promise you will thank yourself for putting in the effort to find out! As another point of interest, renewal time is also a great time to make an extra payment on your mortgage, if you are able!

Beyond renewing your mortgage, homeowners also have the option to transfer or switch the mortgage. This can be done any time during the term of the mortgage but may have penalties associated with breaking the mortgage before the term is up. Transferring to another lender is generally done to get a better rate, but you will need to go through the entire mortgage process again – including the ‘stress test’ – which makes shopping around at renewal time an even smarter option.

If your mortgage is coming up for renewal and you want to find out what lower rates may await you, contact your local mortgage professional! They can help you find the best option for where you are at in your life now and help you to ensure future financial success.

*This post originally appeared on the DLC Our House Blog.