Scammers are everywhere and the high value transactions involved in homebuying means mortgages are one place they prey zealously.
As such it’s vital homebuyers and those taking out mortgages are alert to the signs of their methods.
To help you out, Pete Mugleston, MD and mortgage expert at www.onlinemortgageadvisor.co.uk, has outlined the most common mortgage-related scams to help you weed out any predatory practices.
Deposit fraud
Deposit fraud typically involves criminals intercepting communication between homebuyers and their solicitors or conveyancers on completion day, explains Mugleston.
Completion refers to the very final stage of the homebuying process when ownership of the property transfers, the final funds are received and the new owners receives the key to the door. It often falls on a Friday – and for this reason deposit fraud is also known as ‘Friday afternoon fraud’.
The fraudsters impersonate either the homebuyer or the solicitor – in doing so they are able to redirect the funds for the property’s deposit to a fraudulent account.
Mugleston said: “This scam exploits the time-sensitive nature of property transactions, as completion day is when large sums of money are transferred between parties.
“By the time the fraud is discovered, the funds are usually unrecoverable, leaving the homebuyer at a significant financial loss.”
So, how do you avoid becoming a victim? Mugleston explained fraudsters are continually refining methods to make their scams seem more convincing.
However, if you remain vigilant and knowledgeable about the process involved in completion you will be in a better position.
“Solicitors will always inform clients about communication methods,” said Mugleston, “especially when it comes to transferring funds.”
“Law firms will never discuss banking details via email, so it’s advised that borrowers keep a hard copy of the firm’s bank details and always refer to them and cross reference when needed.”
Upfront fee scams
This one involves scammers cold calling or sending phishing emails to unsuspecting homeowners, posing as legitimate mortgage lenders.
Mugleston said the fraudsters typically offer to refinance the mortgage at attractive terms but require an upfront fee to initiate the process.
“It’s crucial to note that reputable lenders are only permitted to charge specific upfront fees, such as booking fees, arrangement fees and valuation fees,” Mugleston explained.
“Importantly, these fees can only be levied once the mortgage application is accepted, ensuring transparency and legality in the lending process.”
To avoid being taken in by this scam, Mugleston urges homeowners to exercise caution and scepticism when encountering requests for upfront fees. If anyone approaches you with such a request, it may indicate fraudulent activity aimed at exploiting vulnerable individuals seeking mortgage assistance.
These scammers usually prey on the precarious situation of individuals seeking mortgage help, leading to substantial financial losses and emotional turmoil.
Baiting scam
This scam, often referred to as the classic ‘bait and switch’, tricks borrowers by initially offering seemingly irresistible loan terms – ultra-low interest rates and monthly payments.
But, after the borrower invests considerable time and effort in the financing process and prepares to finalise the deal, the lender executes a sudden turnaround, unveiling entirely different loan terms in comparison to the initial offer.
Mugleston said: “This tactic leaves many borrowers feeling trapped, believing they have limited alternatives and fearing rejection from other lenders.
“To safeguard against falling victim to this deception, steer clear of those aiming to catch your interest via advertising flyers or door-to-door sales pitches. Reputable lenders typically refrain from such promotional methods.”
Watch out for anything which seems too good to be true. Interest rates and monthly repayments which seem suspiciously low, said Mugleston, should raise a red flag.
Ditto, and terms and conditions which don’t make sense or which you struggle to grasp.
“Don’t hesitate to request further information from the seller or loan officer,” he added, “and if they cannot provide the necessary details it’s advised to refrain from proceeding with them.”
