Getting a mortgage nowadays is getting harder and harder for the average person. There are a number of barriers that come in the way of homeowners, and due to this reason, some people have had to think outside the box to increase the viability of their purchases. There are numerous ways for Canadians to increase the accessibility of their mortgages. Some people choose to accomplish this by renting out a piece of their house to cover carrying costs or signing a rent-to-own contract.

However, do you know? Many people choose a different way of getting a mortgage too, which is entirely inadvisable as fudging a few numbers on your mortgage application can bring you into big trouble! Let us look at how mortgage fraud and scams work and how you can avoid them. 

What is Mortgage Fraud? And what does it look like?

Mortgage fraud is a crime that entails giving false information to get a mortgage loan or make money from a real estate deal. There are several dishonest tactics that are used by people, including lying on a mortgage application, inflating property valuations, utilising fictitious buyers, and engaging in property flipping schemes. Also, there are fraudulent companies that pose like legit lenders; you need to watch out for such stuff.

There are many common ways that people get involved, such as lying on their mortgage applications, misrepresenting their job status (e.g., saying they are employed, self-employed, hourly, or salaried), or claiming a rental property serves as their principal residence.

What are the consequences?

Financial loss, legal repercussions, harm to credit scores, and civil litigation are all possible outcomes of mortgage fraud. It is a crime that carries a risk of fines, jail time, and reparation. It's crucial to tell law enforcement or a government organisation that looks into financial crimes if you think you may have been a victim of mortgage fraud or if you have knowledge about it. Also, remember that fraud is a crime with serious legal repercussions, including the possibility of being charged with a crime.

How to avoid such scams and frauds as a buyer?

 Mortgage fraud can take many forms, but at its core, it involves misrepresenting or withholding information. Let us look at some advice that may help you avoid such mortgage fraud and scams in Canada: 

1. Research before you apply: You must check the credentials and reputation of a lender or broker before doing business with them. Verify if they have a license and are registered with the necessary regulatory authority. 

2. Read the Documents thoroughly: Before signing any mortgage documents or contracts, ensure you have read and understand them. If there is anything you don't understand, ask questions.

3. Keep a watch on red flags: Watch out for warning signs, including assurances of approval, time constraints for signing paperwork, and demands payment in advance.

4. Consult a professional: Before you make any important financial decisions, such as refinancing or obtaining a mortgage, seek the advice of a reputable financial counsellor, attorney or mortgage broker in Ontario.

What to keep in mind to avoid scams and fraud as a lender or realtor?

Mortgage fraud is like a puzzle with missing pieces, some buyers are tempted to fill in the gaps with false information or dubious promises. As a lender or a realtor, to avoid being caught in this trap, you must carefully examine each piece of information and verify its accuracy and reliability. Remember, just as a puzzle solver is patient and meticulous in their approach, so should you be patient and meticulous in your approach to real estate transactions. Cross-check, verify and repeat!