The phrase “home title insurance” is becoming more common in Canada these days, as the concept catches on with home buyers and their lawyers. Simply put, home title insurance is a policy of insurance that protects the buyer and/or mortgage lender against loss or damage sustained if a claim covered under the policy terms is made. These terms typically involve defects in the title or survey that might affect your right of ownership and ability to resell the property.

This includes unpredictable or undetectable issues such as conflicting interests or ownership of the land, and mortgages or other encumbrances affecting title. Plus, this insurance covers compliance risks such as noncompliance with a restrictive covenants, the existence of work orders, and major encroachments, as well as access-related problems due to right-of-way or easements or other defined rights and defects. Other issues that are covered include fraud and missing heirs.

• Title insurance transfers the risk associated with title from the home buyer, lending institution or lawyer to the title insurer. If a problem with title is discovered after closing, the title insurer may rectify the problem or compensate the holder of the policy, as long as that type of problem is covered by the policy.

A title insurance policy contains:

• Risks or losses the policy will cover
• Risks or losses the policy will not cover
• General terms governing the insurance coverage

Title is a legal term that refers to ownership of a property. As a home buyer, you want to be sure you own the property and have the right to convey it to someone else at a future date.

Prior to your home closing, public records are searched to determine the previous ownership of, and dealings relating to, a property. For example, there may be an existing mortgage on it, liens for outstanding taxes, etc. The property should be free of these items at closing. Occasionally, defects regarding the title are discovered after closing, or are not handled before closing, which can at some future date negatively affect the marketability of the property, or even cost the buyer money to remedy. For example, if the property was conveyed to the previous owner fraudulently, the real owner may demand his/her rights of ownership. Other risks that may be covered under the policy include the forced removal of existing structures on the property, unregistered rights-of-way, and zoning and set back non-compliance.

Generally, there are certain types of risks that are not to be covered, such as environmental hazards, native land claims, and problems agreed to in the purchase agreement or failed to disclose to the lawyer. Discuss with your lawyer what risks are and are not covered, as well as the parameters of the policy, which remains in effect as long as the insured buyer, or their heirs, retain title to the land. Title insurance is available for new and resale homes, condominiums, cottages, rural properties, residential rental properties up to four units, and farms.

Mortgage fraud in Canada is expected to increase as more people enter the homeownership market. Whether you buy a new or resale home, pursuing home title insurance may be in your best interest, depending on the circumstances of your purchase. You may also be required by your lender to buy the insurance. Discuss it with your lawyer and lender, and reap the benefits of being an informed consumer.

As of 2007, First Canadian Title, Canada’s leading provider of title insurance, offers identity theft insurance to its title insurance policyholders. Identity theft is a growing problem in Canada. Someone who has obtained your personal information without your knowledge or consent can commit crimes, rent apartments, apply for loans and any number of other activities using your name.

For a one-time fee, First Canadian Title’s identity theft covers up to $30,000 for expenses involved in credit rating recovery and associated costs, plus up to $10,000 for legal fees resulting from the loss, theft or forgery of a credit card, debit card or forged cheques, and the recovery of lost wages for up to $500 a week, for a total of four weeks, as a result of time taken off to deal with the fraud.

Sometimes, being careful isn’t enough. Identity theft can happen to anyone, anytime. The minimal one-time fee for First Canadian Title policyholders can buy a lot of peace of mind.

Buying a home is one of the most exciting steps in life – and it is also one that carries with it the largest price tag most Canadians will ever encounter. Understanding how much you can afford to spend, and figuring out how to finance your home purchase are critical to your success in obtaining the most house for your money.

Canadians are among the best-housed people in the world, and most own their own homes. This situation has not happened by chance. Canada Mortgage and Housing Corporation (CHMC) (www.cmhc.ca) is the country’s national housing agency, which among many other things assists Canadians in accessing a wide range of innovative and affordable financing choices.

Among the many services CMHC provides are:

• Mortgage Loan Insurance, to help lenders offer mortgages at the lowest possible rates, enabling borrowers to purchase a home with as little as 5% down, and helping renovators or those who are refinancing their properties. See “What is Mortgage Loan Insurance?”
• Help in ensuring a steady supply of low-cost funds for residential mortgages by guaranteeing timely payment on a range of mortgage-based securities
• Canada’s leading Mortgage Loan Insurance for all types of housing

Your best approach to deciding on financing, especially if you are looking at buying your first home, is to figure out early on how much you can afford to pay. This involves taking a good look at your income, expenses, savings, investments and how much debt you have. Be realistic, too – do you have budget-draining events on the horizon such as a wedding, a new car purchase or a baby on the way?

A first step is to know your credit rating. This will help lenders verify your repayment history, and if your credit rating is good, it increases your chances of obtaining a mortgage. To check your history, ask for a copy of your credit rating at www.equifax.ca or www.tuc.ca. A small fee applies.

There are formulas that can help you categorize these items and determine how much you can afford. Before you embark on this exercise, remember to see the big picture. There will be other expenses besides the price of the home. These include legal fees, mortgage insurance, etc., and will typically ad between 1.5% and 3% on to your purchase cost. RBC provides a handy mortgage calculator online at www.rbcroyalbank.com/mortgages - click on “How much can you afford?”

Most people today apply for a pre-qualified mortgage, which allows them to shop knowing exactly what price range they can comfortably afford. Another option is to check with your builder as to whether they offers cap-rate mortgages, which may be available at rates that are guaranteed for a year or longer. Many new home sales offices have a representative from a financial institution on site to help with your financing questions.

You will also discover many down payment options:

• Conventional mortgage (25% down)
• High-ration mortgage (minimum 5% down)
• No down payment mortgage (must have minimum 1.5% value of the home set aside for closing costs)

As high-ratio and no-down payment mortgages have lower downpayments, they require a higher mortgage loan insurance premium, which is added to the amount borrowed. Remember that first-time buyers can also use money saved in an RSP toward a down payment with a maximum of $20,000 per year.

• GST Rebate – When you buy a new house or substantially renovated one as your primary residence, you may be entitled to a rebate of part of the GST. The amount decreases when homes cost more than $350,000 and disappears on homes costing more than $450,000. HOWEVER, check with your builder – in the competitive GTA housing market, the tax is normally included in the sale price. In that case, the rebate is already accounted for and in the purchase agreement you sign over the rebate to the builder. NOTE: If you purchased your home prior to July 1, 2006 and will be taking possession after July 1, 2008, you may be eligible for an additional GST rebate of up to one per cent.
• Land Transfer Tax Rebate – First-time buyers of newly built homes in Ontario, with some restrictions, may apply for a rebate for part of their land transfer tax. The maximum rebate is $2,000. For more information, call 1-800-263-7695.

The following websites have additional information on financing your home:

• The Greater Toronto Home Builders’ Association – Urban Development Institute’s “The HomePages” Buying Guide www.thehomepages.ca
• RBC Royal Bank www.rbcroyalbank.com/buyingahome
• CMHC “Buying a Home” www.cmhc.ca/en/bureho/buho/index.cfm
• Canadian Bankers’ Association www.cba.ca/eng/Tools/Brochures/tools_mortgage.cfm?pg=2

Canadian home buyers are among the most fortunate in the world. Across the country, purchasers have access to world-class quality new homes by Canadian builders, plus buyers have a financial infrastructure in place that is the envy of other countries. Canada’s national housing agency, Canada Mortgage and Housing Corporation (CMHC), makes it possible for you to purchase a home with little or no down payment, so you can take advantage of lower mortgage rates and begin building equity sooner, rather than having to wait until you have saved 25% for a down payment.

How? Through Mortgage Loan Insurance. In essence, CMHC offers insurance that covers lenders' risks associated with the financial loss that can occur when a borrower defaults on the mortgage loan. Because this insurance exists, lenders are more willing to provide mortgage financing at competitive interest rates, even to those who do not have a 25% down payment.

As this is a type of insurance, premiums have to be paid - usually between 0.65% and 2.75%, depending on how much of the purchase price or home value is financed through a mortgage loan. In most cases, it also means that the insurance premium costs are passed along to the purchaser by your lender - either as an upfront lump sum, or added onto your regular mortgage payments. Usually, lenders require Mortgage Loan Insurance for loans made to anyone buying a home with less than 25% of the purchase price to put down. In fact, because this form of CMHC insurance exists, you may qualify to finance up to 100% of the purchase price of your home through your lender.

Mandatory mortgage loan insurance has had a positive effect on Canada's housing finance system over the years, helping to create a stable environment. This insurance is like a safety net for lenders, even during recessions and other slow economic times.

• CMHC's Mortgage Loan Insurance is available for everything from new condominium suites to townhomes, semi-detached homes and fully detached homes. There is no upper limit on the purchase price of a home that can qualify for purchase with a small down payment.
• The new home you are purchasing must be located in Canada.
• Usually, the purchaser will have at least 5% (single-family and two-unit dwellings) or 10% (three- or four-unit dwellings) of the purchase price available for a down payment. The CMHC Mortgage Loan Insurance premium is a percentage of the loan and is based on the amount of your down payment. The higher the percentage you borrow, the higher the percentage you will pay in premiums. This cost is typically offset by the fact that without Mortgage Loan Insurance, you would pay higher interest rates and additional administrative fees.
• Check with your lender to work out the size of the mortgage loan you can afford. There are mortgage calculators available online, but it is best to have the figure calculated by your lender according to your unique situation. Ask about being pre-approved for a CMHC-insured mortgage. Your lender will arrange for your CMHC Mortgage Loan Insurance.
• Check with your lender for the criteria for the types of funds that can make up your down payment.
• Check with CMHC for other programs such as Flex 100, designed to help new home mortgage borrowers who have not saved a down payment at all, but who have managed their debt reliably and have the financial means to repay a mortgage.
• Depending on your circumstances, there may be other requirements that apply. Ask your lender or mortgage broker to explain everything to you in detail.
• Remember - Mortgage Loan Insurance is not mortgage life insurance, which ensures that your remaining mortgage is paid off at the time of your death.

CMHC feels strongly about helping the environment, and offers the opportunity to new home buyers to "Help the Planet, Help Your Wallet." If you use CMHC-insured financing to buy a new home that is energy efficient, you can save 10% on your Mortgage Loan Insurance premium - and you may have the option of extending your amortization period from 25 to a maximum of 40 years. Of course, this would significantly reduce your regular mortgage payments.

Find out how energy efficient the home is that you are thinking of buying. You can do this by acquiring documentation from your builder, or by hiring a qualified energy advisor to evaluate the home's efficiency rating. Then check with CMHC or your lender to determine whether this rating qualifies you for the 10% premium reduction and/or a lengthened amortization.

Thank you, CMHC!

For most Canadians, the biggest challenge in buying a new home is saving the down payment. CMHC's Mortgage Loan Insurance is a streamlined solution that has made it possible for millions of Canadians to realize the dream of homeownership.

To obtain a list of approved lenders and for more detailed information on CMHC's Mortgage Loan Insurance, visit www.cmhc-schl.gc.ca/en/co/moloin/.