Title Insurance
Title insurance acts just as a normal insurance policy, as protection for a property in the case of both title-related and some non-title-related issues. It protects property owners and their respective lenders against losses related to the property’s title or ownership, for example existing liens, encroachment issues and previous fraud.
Lender’s title insurance, which is paid for by the borrower, is for the benefit of the mortgage lender. It protects the priority, validity and enforceability of the mortgage, and provides coverage for the mortgage too, should it become invalid.
Owner’s title insurance protects the property owner from title-related losses that are listed in the policy for as long as the property is owned. Premiums may be paid to protect equity in the property, and it sets a maximum amount of coverage. Prior to purchasing this policy, the insurer must be made aware of any issues or defects that affect the property’s title.
Title insurance works on a no-fault basis, meaning insurance contracts indemnify the policyholder for losses, regardless of fault. Recovery through the civil-justice system for losses by other parties is also restricted.
Benefits
• Defends interest in the property, for example in the case of fraud
• Can cover non-title items, for example building permits
• Covers submission and registration of documents at the Land Titles Office
• Offers no-fault policies
Title insurance is needed in a couple of instances:
• Can provide gap coverage – this will protect the interests of buyers and borrowers during the closing of the transaction. It will assure the state of the title on the date of registration of the land transfer or loan document
• Buyers can purchase it to protect themselves from unknown municipal compliance defects or encroachments
Mortgage insurance
Mortgage default insurance – also known as CMHC, Genworth or Canada Guaranty insurance – is mandatory for down payments between 5% and 19.99%. This insurance type protects lenders, in the event of missed payments or defaults. It usually costs between 2.8% - 4% of the mortgage amount, but it allows owners access to the real estate market, where they may not have had the opportunity beforehand. Without mortgage insurance, rates would increase to cover the risk of defaults. When insured, lenders can offer lower rates because the risk of default is then passed to the insurer.
To qualify for mortgage default insurance, you must meet the following criteria:
• 25 year amortization period
• It cannot be on a property purchased for more than $1 million. 20% down payment is required for these properties
• If the property is bought for between $500,000 and $999,999, minimum down payment must be 5% of the first $500,000 and 10% of the remainder
• Have a Gross Debt Service ratio of less than 35
• Have a Total Debt Service ratio of less than 42
• Have a credit score of at least 680
• The down payment cannot be money that has been borrowed
The only way to minimize your Mortgage Default Insurance is by increasing your down payment as a percentage of your home price. For this to happen, you must increase the amount you put down – through a gift from a family member or a tax-free RRSP withdrawal - or buy a less expensive property.
Title insurance acts just as a normal insurance policy, as protection for a property in the case of both title-related and some non-title-related issues. It protects property owners and their respective lenders against losses related to the property’s title or ownership, for example existing liens, encroachment issues and previous fraud.
Lender’s title insurance, which is paid for by the borrower, is for the benefit of the mortgage lender. It protects the priority, validity and enforceability of the mortgage, and provides coverage for the mortgage too, should it become invalid.
Owner’s title insurance protects the property owner from title-related losses that are listed in the policy for as long as the property is owned. Premiums may be paid to protect equity in the property, and it sets a maximum amount of coverage. Prior to purchasing this policy, the insurer must be made aware of any issues or defects that affect the property’s title.
Title insurance works on a no-fault basis, meaning insurance contracts indemnify the policyholder for losses, regardless of fault. Recovery through the civil-justice system for losses by other parties is also restricted.
Benefits
• Defends interest in the property, for example in the case of fraud
• Can cover non-title items, for example building permits
• Covers submission and registration of documents at the Land Titles Office
• Offers no-fault policies
Title insurance is needed in a couple of instances:
• Can provide gap coverage – this will protect the interests of buyers and borrowers during the closing of the transaction. It will assure the state of the title on the date of registration of the land transfer or loan document
• Buyers can purchase it to protect themselves from unknown municipal compliance defects or encroachments
Mortgage insurance
Mortgage default insurance – also known as CMHC, Genworth or Canada Guaranty insurance – is mandatory for down payments between 5% and 19.99%. This insurance type protects lenders, in the event of missed payments or defaults. It usually costs between 2.8% - 4% of the mortgage amount, but it allows owners access to the real estate market, where they may not have had the opportunity beforehand. Without mortgage insurance, rates would increase to cover the risk of defaults. When insured, lenders can offer lower rates because the risk of default is then passed to the insurer.
To qualify for mortgage default insurance, you must meet the following criteria:
• 25 year amortization period
• It cannot be on a property purchased for more than $1 million. 20% down payment is required for these properties
• If the property is bought for between $500,000 and $999,999, minimum down payment must be 5% of the first $500,000 and 10% of the remainder
• Have a Gross Debt Service ratio of less than 35
• Have a Total Debt Service ratio of less than 42
• Have a credit score of at least 680
• The down payment cannot be money that has been borrowed
The only way to minimize your Mortgage Default Insurance is by increasing your down payment as a percentage of your home price. For this to happen, you must increase the amount you put down – through a gift from a family member or a tax-free RRSP withdrawal - or buy a less expensive property.
