As mortgage brokers, we know many of our clients first consider interest rate and the corresponding mortgage payment as their number one priority. I am sure we can agree when they understand the features, advantages and benefits of the mortgage including terms and even the conditions to secure their financing, things move smoothly without last minute issues or questions.
One lender condition that raises questions is the need for title insurance. Clients wonder why the lender needs it and more important, why they should cover the cost. I know this can be a sticking point for some clients so I deal with it up front. Once I explain how it works they are more accepting of the cost as part of their financing and most see the value of title insurance.
When I cover the mortgage approval process I touch on their closing costs including title insurance. Second, I confirm it on their net cost sheet and finally on their fixed disclosure statement in the closing package. When they visit the lawyer to sign final documents the topic of title insurance is familiar to them and I don’t get those last minute calls. Even though as a mortgage broker I am not providing the title insurance policy I believe it is important to ensure the client is clear on the reason for title insurance.
Title insurance also includes a lender portion and the homeowner has the option to add to the policy. I advise the clients their lawyer will review the policy so they can make an informed decision to add the homeowner option if they choose. Some benefits of title insurance are listed below.
1. The policy transfers risks related to title of the property from the home buyer to the 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.
2. 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
3. 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 knowledge and run.
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. This transfers the cost to fight the case 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 title fraud situation is their responsibility to prove the crime occurred. During that time they could be responsible for a mortgage and the payments.
An example in the news… read on…
If you have clients who may not have taken title insurance in the past taking a minute to discuss the topic could help you differentiate yourself from their bank representative or even another broker who may not share this valuable information.
Fees range depending on the value of the property.
I have provided some links below for your reference. The first link below outlines costs. The second is to First Canadian Title.
Pauline Tonkin, Mortgage Broker
Dominion Lending Centres
Read more amazing blog posts from Pauline – http://mybcmortgage.ca/blog