Protecting Your Investment
When it comes to due diligence and liability coverage, most investors think of tenant screening and building insurance, but often overlook the need to protect themselves against mortgage and title fraud. Although title insurance has been widely used throughout the United States for more than a century, it has only recently been introduced to the Canadian real estate market.
The purpose of title insurance is to protect owners against losses from such things as mortgage fraud and other title-related issues such as liens for unpaid property tax or utilities from the previous owner.
Mortgage fraud has become a recent problem as identity theft by fraudsters has increased. Rental properties are particularly vulnerable because it is more difficult to monitor incoming mail and any irregularities when the property is not owner occupied.
Home owners who have been victimized by mortgage fraud are responsible for proving their case before lenders will absorb the losses and restore proper title to the rightful owner. This can result in a prolonged court battle costing tens of thousands in legal fees. But with title insurance, the insurer will handle the entire process and cover all the expenses required to remedy the problem.
Obtaining title insurance is a very simple process and surprisingly inexpensive. The lawyer, acting on your behalf to close the purchase, can order title insurance for you as part of the closing transactions. For a resale property purchased between $200,000 and $500,000 the cost of title insurance will range from $225 to $350 depending on the location and type of property.
Unlike other insurance policies for which premiums are paid on a monthly or yearly basis, title insurance is paid only once at the time of closing. The coverage will remain in place for as long as you own the property.
Not only is the cost of title insurance for your rental property tax deductible, it can often result in a savings on the closing costs by reducing the number of title searches your lawyer will need to complete. A small price to pay for peace of mind and money well spent to protect your investment property.