Identifying and Avoiding Mortgage Scams: A Contractors Guide
Scammers are a pervasive presence, particularly in the realm of home-buying where high-value transactions take place. It is crucial for contractor homebuyers and those seeking contractor remortgage to remain vigilant and recognise the signs of fraudulent practices.
To assist you in this, we have outlined the most common mortgage-related scams:
Deposit Fraud
Deposit Fraud involves criminals intercepting communication between homebuyers and their solicitors or conveyancers on completion day. This scam, also known as “Friday afternoon fraud,” occurs during the final stage of the home-buying process when ownership of the property is transferred, and the final funds are received.
Fraudsters impersonate either the homebuyer or the solicitor, redirecting the funds for the property’s deposit to a fraudulent account. Unfortunately, by the time the fraud is discovered, the funds are usually irretrievable, resulting in significant financial loss for the homebuyer. To avoid falling victim to deposit fraud, it is essential to remain informed and vigilant.
Solicitors will always inform you about communication methods, especially regarding fund transfers. It is advised to keep a hard copy of the firm’s bank details and cross-reference them prior to ever sending funds. A reputable law firm will never discuss banking details via email.
Upfront Fee Scams
In this scam, fraudsters cold call or send phishing emails to unsuspecting homeowners, posing as legitimate mortgage lenders. They offer attractive refinancing terms but require an upfront fee to initiate the process.
It is important to note that reputable lenders are only permitted to charge specific upfront fees, such as booking fees, arrangement fees, and valuation fees. These fees can only be levied once the mortgage application is accepted, ensuring transparency and legality in the lending process.
To avoid falling prey to upfront fee scams, exercise caution and scepticism when encountering requests for upfront fees. Reputable lenders typically refrain from such practices. If anyone approaches you with such a request, it may indicate fraudulent activity aimed at exploiting contractors seeking mortgage assistance.
Baiting Scam
Baiting Scam Also known as the classic “bait and switch,” this scam tricks borrowers by initially offering seemingly irresistible mortgage terms, such as ultra-low interest rates and monthly payments. However, as the borrower progresses through the financing process and prepares to finalise the deal, the lender suddenly presents entirely different loan terms than those initially offered.
This leaves borrowers feeling trapped, believing they have limited alternatives and fearing rejection from other lenders. Whilst not intentional, unfortunately, this is common in the contractor mortgage market as non-specialist brokers often offer rates from lenders with no contractor lending criteria. It is only once the application is submitted and fees paid that issues start to arise.
Reputable lenders typically refrain from such promotional methods. Be wary of offers that seem too good to be true, such as suspiciously low interest rates and monthly repayments. Additionally, pay attention to terms and conditions that are unclear or difficult to understand.
Request further information, and if they cannot provide the necessary details, it is advised to refrain from proceeding with them. By remaining informed and alert, you can safeguard yourself against mortgage scams and make informed decisions throughout the home-buying process.
The team at My Contractor Broker has over 15 years of experience in assisting contractors to obtain mortgage funding. Start your journey today by calling us on 02394 211122 or using our simple contractor mortgage calculator below.