Q: Do you need a real estate lawyer to refinance your mortgage? ‍

A: While it is not legally required, it has its advantages. So, your application for refinancing has been approved.

What is next? Now you need to close. For any prospective homebuyer in Canada, there are two ways to close - through a title company or a real estate lawyer.

Title companies vs. Real Estate Lawyers

Title companies typically work as a third party between you and your lender.  A Real Estate Lawyer will also work as your representative (in addition to representing your lender) in the closing process.  While closing your mortgage refinance with a title company can be more economical, today we are discussing the pros and cons of using a title company or a Real Estate Lawyer when refinancing your mortgage.

We will go over; what a title company does, and what a Real Estate Lawyer does - highlighting how a Real Estate Lawyer can offer you faster turnaround, legal advice, and peace of mind for any unforeseen complexities.

Related: Switching Mortgage Lenders - What you need to know

Using a title company

As mentioned, a title company acts as a third party in the closing process. While most title companies are known for their core product, title insurance, some also offer closing services that ensure your mortgage conditions are fulfilled and that you receive your funds from your refinance.   As part of the closing services, a title company may also offer a lender title insurance policy, as required by your lender.

‍Q: So, why use a title company?

‍A: It’s economical. Title companies offer a few economical options for their closing services.   If you’re working with a particular lender, your lender may have negotiated deep discounts with the title company for closing services. While that may sound great, there may be some disadvantages to using a title company for your closing.

Delays

For one thing, your closing process with a title company can take a while as your transaction may be part of a cue of thousands of other transactions.  If you need your mortgage funds within a few days for a purchase or need your funds to pay off high-interest debts, ask the title company what to expect in terms of turnaround time and if it is possible to expedite your closing.  

Legal advice and counsel

A title company usually represents your lender in the transaction.  This means that you typically won’t have any guidance, or legal representation, throughout the closing process. Your mortgage is a significant transaction and can be a complex product to understand.  That is why seeking legal representation may work in your favour and help you avoid potential pitfalls in the future..

Unforeseen issues

Title companies are limited in their scope of services, so if your transaction has complications or requires a party to be added or removed from the title, the title company may not be able to help.  

‍Related: Independent Legal Advice and When you May Need it

Using a Real Estate Lawyer

Unlike a title company, a Real Estate Lawyer will work on your behalf and represent you and the lender in the closing process. It is their job to serve your needs, consult and represent your best interests when closing on the property.

‍Q: Is there any reason not to use a real estate lawyer?

‍A: It’s generally more expensive. While in most scenarios,  it is true that using a Real Estate Lawyer can be costlier than using a title company, there are good reasons for that: Keep in mind that purchasing a home will likely be the most expensive purchase in your life.  For something as significant as refinancing your mortgage, it’s vital to invest in good representation.  Even a small mistake or choosing the wrong mortgage product can cost thousands of dollars, not to mention stress and aggravation.   Here are some of the noteworthy advantages of using a Real Estate Lawyer: Related: Closing costs for refinancing your mortgage

Faster turn around

In most cases, a Real Estate Lawyer can help you close in just a few days.  That's because a Real Estate Lawyer is likely to have a shorter cue and resources to complete documentation and expedite your closing. If you need your funds quickly, using a lawyer might be a faster option than a title company.

Legal advice and counsel

Title companies may be well equipped to verify and insure the title of the property, but what happens if you need clarity on a question?

• Are your interests fairly represented in the contract?
• Are all clauses legally binding?
• What happens if you want to break the mortgage mid-term?
• Have you done your due diligence for scams or fraud?

If you aren’t able to answer those questions, you may need a Real Estate Lawyer.

Complexities and peace of mind

It is especially important to have legal representation for refinancing your mortgage to deal with complex situations that haven’t been addressed within the contract. For example:

• If you are adding or removing a party from the title

Whatever the situation, the most important part of your close is verifying that any potential problems are addressed and dealt with. Ultimately, knowing is half the battle. There may be circumstances where using a title company would be fine, and no issues would arise. The problem is that there is no way of knowing if that is the case until you are deep into your closing process.

Our bottom line:

On your journey to homeownership, you’ll want to protect and represent your interests well. While a Real Estate Lawyer may be costlier by a few hundred dollars,  than using a title company, a Real Estate Lawyer may be a better investment to ensure you get great service and protect your interests in a significant mortgage transaction. A good Real Estate Lawyer will help you avoid:

• The unforeseen costs and liability of an unvetted contract could be very expensive down the line.
• Unaddressed title concerns could leave ambiguous ownership between you and your partner