The Role of a Lawyer and Insurance When Buying a New Home
Purchasing a new home is a unique and exciting experience, but it’s important to be aware that the process involves many legalities and exposure to risk. Although most transactions close without any problems, choosing a lawyer with real estate experience, and understanding your insurance obligations and options, can be invaluable if difficulties should arise.
WHAT DOES A LAWYER DO?
Before the offer:
- Reviews offer clauses to help buyers understand the legal aspects of the contract.
- After the agreement is accepted:
- Details exact closing costs.
- Searches title, taxes, utilities, building and zoning or orders title insurance.
- Performs an execution search.
- Puts together mortgage and other financing arrangements.
- Verifies insurance policy documentation.
- Calculates land transfer tax.
- Requests resolution of any problems found in searches.
A few days before closing:
- Addresses any Provincial Sales Tax issues.
- Prepares mortgage documentation, statement of adjustments, and documentation for land registry.
- Accepts closing funds.
- Executes a review and directs the signing of necessary documentation by the buyer.
Closing day:
- Exchanges mortgage documentation for money.
- Meets with the seller’s lawyer.
- Completes final searches.
- Transfer of funds.
- Registers deed and mortgage in buyer’s name.
- Pays land transfer tax.
- Obtains keys from the seller’s lawyer.
After completion:
- The lawyer will send the buyer a reporting letter certifying their title together with the deed, survey, and all other related documentation.
INSURANCE
The insurance requirements associated with homeownership can be complex. Here’s an overview of the various types of home-related insurance.
Homeowner’s Insurance
Protects your home against hazards, and liability coverage against injury to visitors. Policies can also protect the home’s contents. Your lender requires homeowner’s insurance in an amount at least equal to your mortgage.
Mortgage Life Insurance
The amount of insurance is equal to the principal amount of the mortgage. In the event of the mortgagor’s death, the balance of the mortgage is paid off.
Mortgage Insurance
Canada Mortgage and Housing Corporation (CMHC) insurance protects lenders of high ratio mortgages against default.
Title Insurance
Eliminates the risks of defective property title. A title claim can be costly and potentially result in a loss of home equity.
Purchasers are encouraged to buy title insurance because of the cost savings when hiring a lawyer. Title insurance omits the need for lawyers to perform certain searches. As municipalities increase their search fees, title insurance becomes even more cost effective.
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