Title Insurance

No, I do not sell title insurance it can be bought either directly through the insurance company, but most people get it through the lawyer on closing when they buy a house.

So why am I writing about it?

Well I was at an interesting seminar yesterday given by a lawyer who made some really interesting points about getting title insurance and he highlighted why it is so cheap.

Given that I mostly write about money things let me get to that part first.  The big thing is that it is not like other insurance, there are no ongoing payments it is a one time purchase and it covers you for as long as you own the house.  The cost does vary depending on the value of the home, but it is still pretty cheap.  If you get it when you buy your home the net cost is actually around $100 for an average home.  The reason I use the term net it because it can be higher than that, but when you get it it means the lawyer does not have to make a few searches which you would have to pay for if you decide against buying the insurance.

We know it is cheap but what does it do?


Well with luck, like any insurance, you will never need it, but for those who do it is probably the best buy of their lives.  It can save a fortune in legal costs, time and hassle and just straight up money.  The big things it can protect you from are title or mortgage fraud.

Title fraud is when someone assumes your identity, or forges a power of attorney and then sells your house/property without your knowledge.  The buyer is almost always a legitimate buyer, but clearly you did not sell the property, the problem then is the fight in court to get it back with all the associated costs.  Under Bill 152 you cannot loose your property to fraud but you still have to go to court to get access to the public restitution process.

Mortgage fraud is similar, someone takes on your identity and puts a mortgage on your property and walks away with the money and you are on the hook for the debt.  The first sign of this having happened for most people is when they get a letter in the mail thanking them for their mortgage business.   If you get this letter and did not do a new mortgage recently then do not ignore it you have a battle ahead.

In both cases the title insurance company takes care of everything.  They fight the battle to reclaim the title and with the mortgage they pay it off and then deals with the fallout.

The people who are most vulnerable, but anyone with a property is a potential target, are the more expensive houses (the fraudster can get a bigger mortgage) and people who go away for long periods during the year.

Other nice aspects include:

•  It eliminates the need to update the survey on the property if a neighbour builds on your property or there are other related issues the insurance company takes care of things.

• It covers you in a purchase situation if the vendor, who has committed to paying the taxes or the water bill etc.  fails to do so and you find out after the completion of the sale.

I used to think that if I had a mortgage or a line of credit on the house that this would protect me, but I understand now that the fraudster would pay out any of those loans, and just take out the bigger mortgage and take the difference.  It made me want to go back and check to see if I had the insurance.

If you have bought a home recently then the odds are your lawyer discussed title insurance with you, but if you bought it a long time ago chances are you do not have it and if not you might want to revisit the idea. 

Refinancing - Things to consider

Refinancing is considered for many reasons

1. Debt consolidation and bringing down the cost of debt 
2. Taking out equity to do home renovations or buy hard to mortgage properties 

 The one some people forget is

     3.  Getting a cheaper rate before the existing mortgage comes due

Today I am going to focus on this one.

What if you got into a 5 year fixed rate mortgage 3 years ago, in September 2008 ING’s rate was 5.45%. Today you can get a 4 year fixed rate at 2.99% and a 5 year fixed at 3.39%.

Depending on the size of your mortgage those numbers represent some pretty big savings. So what do you do?

a) Wait and see the mortgage through and hope things are still low when you are ready?

b) Call up your lender and find out what the penalty would be and see if adding that to the refinanced mortgage at the lower rate would save you money?

c) b) + think about my plans for the next 5 years and decide if you might also want to renovate now, or if you are planning to move at some point.

My answer is usually c). The most important thing to do is to make sure you know what the plan is with regards to the house. If you are moving, then you probably do not want to do much more than fix it up enough to sell it. If you are planning to stay then you should consider reviewing any projects that you were thinking about to see if now is the right time to put them in while the money is cheap.

If it fits the life plan to consider the refinancing then the next step is to make sure you have the timelines in place. Once you know which course of action you are going to take then you need to decide if you are taking equity out for the changes, or just going for the better rate. Let’s face it if you can make the payments at 5.45% then 3.39% is a snap.

Assume the mortgage was $200,000 when you got it with a 25 year amortization

At 5.45% your monthly payments would be around $1,215

Now three years into your mortgage you decide to switch to a new deal and want to have the house paid off at the same rate as before then look what happens.

At 3.39% with 22 years to pay off the loan your payments would be $1,007, Assuming pre-payment penalties of $5,000 and costs to do the deal at $1,000 (legal etc.) then you have a monthly savings of $208 and an interest savings of $54,862.

The rule of thumb tends to be if interest rates are 0.5% or greater than your current rate then it is at least a good time to consider your options. It may not be right for every deal, but it might be worth the time to work it out.