Buying a home is a significant investment, and with any investment, there is always a certain amount of risk involved. One way to mitigate some of that risk is by purchasing title insurance. Title insurance is a form of insurance that protects homeowners and lenders from financial loss due to defects in the title of a property. In Toronto, it is a common practice for homebuyers to purchase title insurance, and for good reason. In this article, we will explore the importance of title insurance when buying a home in Toronto.
What is title insurance?
Title insurance is a type of insurance policy that protects homeowners and lenders from financial loss due to defects in the title of a property. These defects can include things like liens, encroachments, fraud, or errors in public records. Title insurance policies are usually issued for a one-time fee and are valid for as long as the homeowner or lender owns the property.
Why is title insurance important?
Title insurance is important because it protects both the homeowner and the lender from financial loss due to defects in the title of a property. For example, if you purchase a home and later discover that there is a lien on the property, the lien holder may be entitled to the proceeds from the sale of the property. This means that you could potentially lose your investment in the property. However, if you have title insurance, the insurance company will typically pay the cost to clear the lien, up to the amount of the policy.
In addition to protecting homeowners and lenders from financial loss, title insurance can also provide peace of mind. Knowing that you have protection in case something goes wrong with the title of your property can help alleviate some of the stress that comes with buying a home.
What does title insurance cover?
Title insurance policies can vary, but in general, they provide coverage for the following:
- Fraud or forgery: If someone forges a signature on a document or commits fraud related to the title of the property, the insurance policy will cover the cost to correct the problem.
- Unknown liens or encumbrances: If there are liens or other encumbrances on the property that were not disclosed at the time of purchase, the insurance policy will cover the cost to clear them.
- Errors in public records: If there are errors in public records related to the title of the property, the insurance policy will cover the cost to correct them.
- Boundary disputes: If there is a dispute over the boundary lines of the property, the insurance policy will cover the cost to resolve the dispute.
- Undisclosed heirs: If someone claims to be an heir of the property but was not disclosed at the time of purchase, the insurance policy will cover the cost to resolve the issue.
How do you purchase title insurance?
In Toronto, title insurance is typically purchased through a lawyer or notary public as part of the home buying process. Your lawyer or notary public will typically research the title of the property and advise you on whether or not you should purchase title insurance.
The cost of title insurance can vary, but it is usually a one-time fee that is paid at the time of closing. The cost of the policy is based on the purchase price of the property and the type of policy you choose.
In conclusion, title insurance is an important part of the home buying process in Toronto. It can protect both the homeowner and the lender from financial loss due to defects in the title of a property. If you are in the process of buying a home in Toronto, be sure to speak with your lawyer or notary public about title insurance and whether or not it is right for you.