Do you need title insurance for a new-build home?

Mortgage Tips Trina Kieswetter 22 Feb

The housing supply shortage is one of the top issues in Canada’s real estate market. To address it, cities like Calgary are seeing a massive boom in new-build housing.

New construction offers many advantages, like more energy-efficient heating and cooling systems. Their titles can also feel less risky to transfer. After all, if the land was previously vacant, there’s no chance of unpermitted work from a previous owner causing losses for new buyers.

But did you know that new builds carry most of the same title and off-title risks as existing homes? Here’s why.

the home may be new, but the land isn’t

Even unimproved land belongs to someone. The land for the new construction may have changed hands several times before the developer bought it. Every transfer of the land can add defects to the title. Those defects can cause losses for the people who buy homes built on that land. On top of that, both the municipality and the developer might make a mistake or miscommunicate, which can end up causing a problem with the property.

Here are just some of the issues that can cause losses for owners, even on new constructions:

  • Zoning mistakes, which can happen on either the municipality or the developer side.
  • Setback agreements the developer didn’t know about, which results in homes built too close to the road.
  • Pre-existing liens, for example from property tax still owed by the previous owner.
  • Errors in the registration of the title.
  • Pending legal action against the property that the developer didn’t know about.
  • Builders’ liens, if the developer wasn’t able to fully pay a supplier or contractor.

subdivisions can add extra complications

When an owner buys a property in a subdivision, they’re getting the title to that specific property. But all the land in that subdivision would have been under one original title before it was parceled out. The problem is, if someone has a claim against that original title, every property in the subdivision could be subject to it.

If the land for the subdivision was assembled from existing properties, that can add complications to the title of the assembled land. Those issues can then impact the new properties parceled out of that assembled land.

The developer could also make mistakes setting the property lines in a subdivision. If that happens, or if there are issues with the Real Property Reports/surveys conducted for any of the properties, the owners of those properties could have to deal with the consequences down the road.

how can title insurance help alberta’s new housing starts?

Title insurance is a great solution for new construction because it can cover homebuyers for the risks associated with all properties, risks introduced by subdividing land, and even title fraud. A title insurance policy protects the insured for as long as they have an interest in the property. It also works as a better closing solution than Western Conveyancing Protocol alone, or gap-only insurance.

Builders help with some of the risks of new construction by issuing a Real Property Report to the owner. It’s a useful document, but it has a limited scope and doesn’t offer owners any recourse if an issue comes up. It also becomes obsolete if an owner puts up a new exterior structure, like a fence or a deck. A title insurance policy covers the outside elements of a property as well as the home itself, which means it still provides protection to future buyers if the current owner adds structures.

post construction endorsement

FCT offers more protection on new construction with our Post Construction Endorsement. It advances the policy date by one year for 14 covered risks, including encroachments, work orders and zoning bylaw violations.

That means the policy covers any later improvements to the property the developer had contracted for before the closing date. Owners can take possession of their new-build home knowing that FCT is here to help handle surprises down the road.

Enjoy more protection for new-build home purchases with a residential title insurance policy from FCT.

 

Published by FCT

How to provide a tax-free gift to your children with the CHIP Reverse Mortgage

Mortgage Tips Trina Kieswetter 22 Feb

The current economic landscape can be challenging for young Canadians to navigate as they face great uncertainty with heightened interest rates and inflation. It can be frustrating as they are just starting to build their career, considering buying a home or starting a family. If you are a parent, you may be thinking about how you can help your child during this period. The CHIP Reverse Mortgage by HomeEquity Bank is a sound financial solution that can help you support your loved ones by providing a tax-free gift.

The Gift of Early Inheritance 

As a parent, you may want to provide an early inheritance to see your adult children use the funds to improve their lives in a time of need. By giving an early inheritance, you can avoid probate fees (estate administration tax) and save money by bringing you to a lower tax bracket*. With an early inheritance, your children can pay for their wedding, start a business, pay off student loans, make a down payment on their home, and much more. Speak to your tax specialist for more details.

How the CHIP Reverse Mortgage Works

You may have heard of people using a home equity line of credit (HELOC) or liquidating their investments to gift an early inheritance. However, there are disadvantages associated with loss of earnings or tax payable when it is time to sell their investments. The CHIP Reverse Mortgage by HomeEquity Bank allows you to unlock up to 55% of the equity in your home without any of these challenges. With the CHIP Reverse Mortgage, your investments remain intact, and no monthly mortgage payments are required. Therefore, your income is not affected, and best of all, the money you get from the CHIP Reverse Mortgage is tax-free!

If you want to provide a tax-free gift to your children, contact your Dominion Lending Centres mortgage expert for details on how the CHIP Reverse Mortgage by HomeEquity Bank can help you.

*HomeEquity Bank requires all clients to receive independent legal advice to review the mortgage contract and ensure they fully understand the terms and conditions.

 

Published by HomeEquity Bank

Title insurance and home insurance–protect what matters most

General Trina Kieswetter 16 Feb

When something goes wrong with your home and you suffer a loss, you need to be able to rely on your insurance coverage. Knowing which of your insurance policies to turn to isn’t always easy. Title insurance and home insurance both offer important protection, but many get them confused. So, what’s the difference between home insurance and title insurance?

what is home insurance?

Home insurance is a type of property insurance that can provide coverage for:

  • losses from damage to your residence as well as other structures on your property;
  • losses from property damage due to natural disasters like fire and windstorms (flood and earthquake coverage is often a separate purchase);
  • stolen or damaged items in your home;
  • potential liability or medical coverage if someone gets hurt on your property.

Many lenders require their borrowers to buy home insurance as a condition of securing a mortgage.

what makes title insurance different from home insurance?

A title insurance policy protects your title, which is your legal ownership of the property. It can provide coverage for a number of risks stemming from title defects, which prevent free and clear ownership. It can also cover losses due to encroachment and zoning issues, unpermitted work by a previous owner, and even title fraud.

When you buy home insurance, it’s to prevent losses from events that might occur in the future. Most title insurance coverage focuses on existing, unknown issues or defects relating to the property and/or its title. It’s a subtle difference, but an important one. Unfortunately, one of the most common reasons we have to deny claims for is because the homeowners thought they had a title insurance policy when all they had was home insurance.

THERE ARE LENDER AS WELL AS HOMEOWNER TITLE INSURANCE POLICIES

Title insurance does more than just protect you once you take ownership of your property—it can help the closing process itself go more smoothly. That’s one reason why many lenders require borrowers to purchase a lender title insurance policy or loan policy as part of getting their mortgage. To get protection for yourself, you also need a homeowner title insurance policy. Knowing the distinctions between the two policies can save you from losing out.

TITLE INSURANCE IS A ONE-TIME COST

One big difference between home insurance and title insurance is the way their premiums are set up. You pay for home insurance every month, and that payment potentially increases if you have to make a claim. With title insurance, you buy your policy with a one-time premium that’s based on your property’s location and size. The premium also varies by province, but $150 – $350 is a reasonable range to expect based on average 2021 home prices.

HOW LONG DOES TITLE INSURANCE LAST?

Your homeowner title insurance policy lasts as long as you have an interest in the property. The policy can also pass to your heirs or other beneficiaries if they inherit title from you.

Your lender title insurance policy lasts as long as your mortgage does. That means that if you refinance the mortgage with a new lender, you might need to get a new lender policy. Home insurance coverage isn’t normally affected by refinancing, as long as you keep paying the monthly premium. Your lender may require you to show proof of home insurance for a refinance, just like with a new mortgage.

which type of insurance is better?

Title insurance and home insurance cover different risks of home ownership. Having both policies can help you properly prepare for what the future may bring. The risks that title insurance covers are both expensive and hard to anticipate, but protecting yourself is simple. For a one-time premium, you can make sure you’ve got the coverage you need with a homeowner title insurance policy from FCT.

 

 

Published by FCT

How can homeowners protect themselves against title fraud?

Mortgage Tips Trina Kieswetter 16 Feb

With news stories surrounding title fraud breaking weekly, more homeowners are asking what they can do to protect their homes before they become the next headline. Daniela DeTommaso, President of FCT, addressed the issue in a recent interview on CBC’s Metro Morning with Ismaila Alfa.

“We’re seeing a level of sophistication in these frauds we’ve never seen before,” Daniela explains. “[Fraudsters are] falsifying identification, but to the human eye, you would never know that they’re not the person they’re pretending to be.”

Title fraud impacts both homebuyers and homeowners. Someone whose title has been stolen, or who purchased a fraudulently listed property has few options for recourse. “We’re seeing innocent people on both sides [of transactions] just devastated by something they could never have even imagined could happen to them,” says Daniela.

Industry experts are urging homebuyers to purchase title insurance as part of closing. Tim Hudak, CEO of the Ontario Real Estate Association (OREA) recently described title insurance as “the best safeguard” for homebuyers.

title fraud protection for existing homeowners

Title insurance is still an option for homeowners after they take possession, even years later. But once an issue like fraud is discovered, it can be too late to provide coverage. According to Daniela, the best time to purchase a title insurance policy is now.

“There’s no reason you shouldn’t be getting title insurance, just like you wouldn’t buy a house without property and casualty insurance,” she explains. When a homeowner with a title insurance policy learns their title has been stolen, they benefit from more than just their coverage.

“The title insurance company also has a duty to defend,” says Daniela. “That means that the minute we find out [title fraud] has happened, we step in and we protect [the insured]. We pay all of the costs.”

Those costs include the legal fees to restore a homeowner’s title, which can be in the tens of thousands, as well as the costs of investigating the fraud and handling all the legal processes.

“It’s not only compensating for that significant loss,” Daniela continues. “It’s also just providing that peace of mind knowing that someone’s going to navigate this process for you, and any costs […] having to prove that you are who you say you are.”

If you aren’t insured yet, don’t wait for your home to make headlines. Protect yourself and your property with an existing homeowner’s title insurance policy from FCT.

 

 

Published by FCT