Is Title Insurance Necessary When Paying Cash?
It’s a great feeling to be able to pay for a property with cash. So is skipping the paperwork that goes hand-in-hand with a mortgage!
But when planning for such a property purchase, you’ll likely be thinking about insurance cover. More specifically: Do I need title insurance if I pay cash?
Let’s look at what title insurance can offer for cash property buyers in Australia.
Why consider title insurance?
Title insurance can help to protect your interests as a property buyer, whether you’re starting a 30-year mortgage or paying cold hard cash. And there can still be property ownership risks, even if you are paying with cash.
This is because:
- Cash sales are not immune to title defects and property fraud.
- A property paid for with cash could still be subject to neighbourly disputes over boundary lines and encroaching structures.
- Conveyancers and council staff could still make mistakes when it comes to rates and taxes, and
- Even if you do all the due diligence in the world, there could still be things you discover about your property after buying, like non-compliant structures or unapproved renovations.
For those wondering, 'Do I need title insurance for cash purchases?', here are some of the protections it could provide.
Protection against fraud and forgery
Even when buying a property through a cash sale, mortgage fraud and property fraud are still a risk.
In 2014 a Canberra homeowner’s house was sold out from underneath them while they were out of the country, and there are other cases of scammers impersonating agents and owners to manipulate property transactions.
The right title insurance policy can provide cover for:
- Fraud or forgery that might result in your land being sold to another owner, and
- Defective registration of a document affecting your interest or rights to your property.
What other benefits can title insurance have?
Protection against boundary issues
Let’s say you discover after you’ve purchased your home that some of the property was illegally built without a council permit. Or perhaps the neighbour has raised an issue with your garage encroaching onto their property. These cases can require huge costs to sort out, be it through surveying, legal consultation, demolition and/or rebuilding. If you have a title insurance policy for that property, you could make a claim for financial and administrative support for:
- Illegal structures, incorrect boundaries and encroaching structures built without your knowledge or consent.
In this sense, title insurance for cash sales can also be a wise move. How else could this type of insurance protect your investment?
Safeguarding your use of the property
Here’s another example of title insurance’s importance for property owners.
You might expect a cash sale to be a straightforward and simple transaction. But what happens if you later learn that your residential property is not actually zoned residential, despite what you were told when you purchased it? In other cases, you might learn that the rates or land tax were calculated incorrectly when you bought – leaving you on the hook for extra costs. Luckily, title insurance can cover situations including:
- If you can’t use or live in your property because of a discrepancy in planning and zoning laws, and
- Wrongly calculated rates and land tax.
If you’re asking yourself, ‘Do I need title insurance if I am paying cash?’, consider the costs that it could potentially save you in the long run.
Is title insurance necessary when paying cash?
Title insurance is not a mandatory form of insurance in Australia. It’s ultimately your choice whether title insurance is right for you and your property purchase. However, keep in mind that the right title insurance cover can provide peace of mind and protection against a range of property ownership risks, all for a one-off premium and no excess in the event of a claim.
In 2022, around a quarter of houses were bought without a mortgage in Australia. If you pay cash you may be downsizing, making a tree change to a regional area or putting your hard-earned savings into an asset for the long term. Why risk high costs and stress when it comes to typical property ownership risks? When it comes to a cash sale, title insurance can be a savvy move.
Learn more or get a quote
To learn more about the benefits of a policy for property buyers, head over to what is title insurance.
Sign up for our monthly updates for more property ownership tips!