March 10, 2025
If you're buying or refinancing a home in Alberta or anywhere in Canada, you may be asked to purchase title insurance as part of your mortgage closing process. But what exactly is it, and why do lenders require it? Title insurance protects the lender from potential issues with the property’s ownership, helping to ensure their investment is secure. While this coverage is for the lender, understanding its purpose can help homebuyers protect themselves as well.
Protecting Against Title Issues
Title insurance safeguards lenders from problems that could affect a property's legal ownership. These issues—known as title defects—may include unpaid debts, errors in public records, or even fraudulent claims against the home. If a past owner had an outstanding lien or an unknown heir comes forward claiming rights to the property, title insurance ensures the lender won’t lose their financial stake in the mortgage.
Preventing Fraud & Forgery Risks
Mortgage fraud and title fraud are growing concerns in Canada, especially in Alberta’s major cities like Calgary and Edmonton. Fraudsters have been known to forge documents to sell a property they don’t own or even take out a mortgage in someone else’s name. If this happens, title insurance helps protect the lender from financial loss and potential legal battles.
No Need for a Property Survey
Before title insurance became common, lenders in Alberta often required a Real Property Report (RPR) to confirm property boundaries and structures. Title insurance now eliminates this requirement in many cases, streamlining the process and saving buyers money on costly survey updates.
Covering Legal Costs for Disputes
If a title dispute arises, legal fees can add up quickly. Title insurance covers legal expenses related to defending ownership claims, ensuring the lender doesn’t take on unexpected financial risks.
Zoning & Permit Issues
A previous owner may have completed renovations or added structures without the proper permits, which could lead to fines or removal orders from the municipality. Title insurance provides some protection against financial losses related to zoning or permit violations.
A Must-Have for Mortgage Approval
Lenders in Alberta and across Canada require title insurance to protect their investment, and the cost is usually included in the buyer’s closing costs. However, this only covers the lender—not you as the homeowner. That’s why many buyers choose to purchase owner’s title insurance for extra protection against hidden title issues that could affect their property rights in the future.
Title insurance is a standard part of the mortgage process in Alberta and across Canada. While it primarily protects the lender, it also offers peace of mind by reducing risks associated with fraud, unpaid debts, and legal disputes. If you're buying a home, consider getting owner’s title insurance as well—it’s a small investment that could save you thousands in the long run.
Source: Absolute Mortgage Team