Frank Salvatore
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Mortgage Default and Title Insurance

September 27, 2011 by · Leave a Comment 

Mortgage Default Insurance

There are a lot of things to consider when buying real estate in Hamilton, in particular mortgage options and mortgage insurance.  Your real estate broker can recommend a mortgage broker but before you speak with them here is some information on mortgage insurance.

Mortgage default insurance is the security for the lender who may be at risk if a borrower defaults on making payments. This insurance is required by law for all high ratio mortgages, which is anything less that 20% down, needs to be insured and may also be applied on certain conventional mortgages, however all default insurance is not the same. What you may not know is that different mortgage default insurers have different criteria past the 20% rule.

For years the only insurer was Canada Mortgage and Housing Corporation (CMHC), and then Genworth Financial Canada came onto the scene. Recently a new player emerged – Canada Guaranty Mortgage Insurance Company. What this competition did for Canadian consumers was reduce the amount of the mortgage insurance fees, which vary according to each individual’s situation.

Each of the three mortgage default insurers now offers a selection of programs.Here are a few examples:

  • A Self-employed program for those who can’t provide traditional income verification.
  • The Cashback Equity program that helps home buyers with good credit purchase a home without using a traditional down payment.
  • The Family Plan program for homeowners who want to help buy a home for elderly parents or entrepreneurial/student children with good credit but insufficient income to meet standard requirements.
  • A Purchase Plus Improvement program that makes it possible for home buyers to make improvements to homes immediately after taking possession.
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How Title Insurance protects you

Title Insurance is a fairly recent addition to the closing costs on a home. It is unlike any other insurance protection and was introduced to protect homeowners from fraud. Basically it ensures that the property you’ve purchased has “good” title, which is your right of ownership and protects any risks against it, even if the problem is found after purchase. Some of the risk involved is as follows:

  • Someone could take your title thought fraud or forgery but you might know about it until you sold your property or you get a letter in the mail that you owe money you know nothing about. Fraudsters can get your information and open up bank accounts and run up credit cards, which will affect your credit  rating
  • A new survey might chow an encroachment on your land
  • A new survey may show an easement, which is a right acquired for access to another person’s property. For example, homes near a conservation area may have an easement allowing hikers to travel across a portion of the property
  • A search of your title might find that your property might not meet zoning by-laws
  • A previous owner might not have been discharged from title

If a problem comes up after closing the title insurer is responsible to either fix the problem or compensate you. Your lawyer can tell you what is covered. Title insurance is a one-time cost and can be purchased any time. The cost is based on the price of your home, the type of home you have and whether it’s a new purchase or a refinance.

The biggest benefit for you is the peace of mind knowing that if there is a problem with the title – you’re covered.

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Frank Salvatore