What is Mortgage Fraud?
Diane Buchanan • October 30, 2017
Have you ever wondered about how to protect yourself from mortgage fraud? Although the chances of you becoming a victim of mortgage fraud is relatively small, if you do become a victim, it will certainly have a long lasting negative impact on your life. So best to be aware of the warning signs. So here’s some information from the Government of Canada provided through the Canadian Mortgage and Housing Corporation that outlines mortgage fraud, and what you can do to protect yourself.
How to Protect Yourself When Purchasing or Refinancing a Home
Beware of promises of “easy money” in real estate. Consumers who knowingly misrepresent information when buying or refinancing a home are committing mortgage fraud.
What is Mortgage Fraud?
Mortgage fraud occurs when someone deliberately misrepresents information to obtain mortgage financing that would not have been granted if the truth had been known. This can include:
- Misstating your position or inflating your income or length of service at your job.
- Stating you are a salaried/full time employee when you are a contract, part time, hourly or commission-based employee or are self-employed.
- Misrepresenting the amount and/or source of your down payment.
- Purchasing a rental property and misrepresenting it as owner-occupied.
- Not disclosing existing mortgage and/or debt obligations.
- Misrepresenting property details or omitting information in order to inflate the property value.
- Adding co-borrowers who will not be residing in the home and do not intend to take responsibility for the mortgage.
- Another common form of fraud is when a con artist convinces someone with good credit to act as a “straw buyer”.
A straw buyer is someone who agrees to put his or her name on a mortgage application on behalf of another person. In return for their participation, straw buyers may be offered cash or promised high returns when the property is sold. Often, straw buyers are deceived into believing they will not be responsible for the mortgage payments.
Consequences of Misrepresentation
Borrowers who misrepresent information and straw buyers who allow a property to be purchased in their name are committing mortgage fraud and will be liable for any financial shortfall in the event of default. They may also be held criminally responsible for their misrepresentation.
What Can You Do to Protect Yourself?
To protect yourself and your family from becoming victims of, or accomplices to mortgage fraud, be an informed consumer. This means:
- Never deliberately misrepresent information when applying for a mortgage.
- Never accept money, guarantee a loan or add your name to a mortgage unless you fully intend to purchase the property. If you allow your personal information to be used for a mortgage, even for a brief period, you could be held responsible for the entire debt even after the property is sold.
- Always know who you are doing business with. Use licensed or accredited mortgage and real estate professionals.
- Never sign legal documents without reading them thoroughly and being sure you understand them. If uncertain, obtain a second legal opinion or, if necessary, the services of a translator.
- Get independent legal advice from your own lawyer / notary. Talk to your lawyer / notary about title insurance and other alternative methods of protection.
- Your lawyer will advise you if anyone other than the seller has a financial interest in the home or if there are any outstanding liens or tax arrears.
- Contact the local provincial Land Titles Office to obtain the sales history of any property you are thinking about buying, and consider having it inspected and appraised. An accredited appraiser will provide the property sales and MLS history.
- If a deposit is required, make sure the funds are payable to and held “in trust” by the vendor’s realty company or a lawyer / notary.
- Be wary of anyone who approaches you with an offer to make “easy money” in real estate. Remember: if a deal sounds too good to be true, it probably is.
There are also simple steps you can take to protect yourself from another common form of fraud: identity theft. These include:
- Never give out your personal information until you know who you are dealing with and how your information will be used. This includes requests for information in person, by mail, or over the phone or Internet.
- Never reply to e-mails or phone calls that ask for your banking information, credit card details, passwords or other personal or sensitive information, particularly if you did not initiate the exchange.
- Review your mail, bank statements and other financial statements on a regular basis to look for any inconsistencies. If you do not receive a bill on time, follow up with your creditors or service providers. You may also wish to contact your local Postal Outlet to ensure your mail has not been held or re-routed.
- Shred or destroy all personal and financial documents before you throw them away.
- Obtain and verify your credit report at least annually by contacting Canada’s two credit-reporting agencies: Equifax Canada at www.equifax.ca and TransUnion Canada at www.transunion.ca.
Reporting Fraud
If you suspect that you or someone you know has been the victim of mortgage fraud, please contact your local police department or The Canadian Anti-Fraud Centre.
On-line: www.antifraudcentre-centreantifraude.ca
Toll Free: 1-888-495-8501
Toll Free Fax: 1-888-654-9426
To find out more about mortgage fraud, visit the fraud prevention section of the Canadian Association of Accredited Mortgage Professionals (CAAMP) website at http://mortgageconsumer.org/protect-yourself-from-real-estate-fraud.
This article was originally published on the CMHC website here.
How to Use Your Mortgage to Finance Home Renovations Home renovations can be exciting—but they can also be expensive. Whether you're upgrading your kitchen, finishing the basement, or tackling a much-needed repair, the cost of materials and labour adds up quickly. If you don’t have all the cash on hand, don’t worry. There are smart ways to use mortgage financing to fund your renovation plans without derailing your financial stability. Here are three mortgage-related strategies that can help: 1. Refinancing Your Mortgage If you're already a homeowner, one of the most straightforward ways to access funds for renovations is through a mortgage refinance. This involves breaking your current mortgage and replacing it with a new one that includes the amount you need for your renovations. Key benefits: You can access up to 80% of your home’s appraised value , assuming you qualify. It may be possible to lower your interest rate or reduce your monthly payments. Timing tip: If your mortgage is up for renewal soon, refinancing at that time can help you avoid prepayment penalties. Even mid-term refinancing could make financial sense, depending on your existing rate and your renovation goals. 2. Home Equity Line of Credit (HELOC) If you have significant equity in your home, a Home Equity Line of Credit (HELOC) can offer flexible funding for renovations. A HELOC is a revolving credit line secured against your home, typically at a lower interest rate than unsecured borrowing. Why consider a HELOC? You only pay interest on the amount you use. You can access funds as needed, which is ideal for staged or ongoing renovations. You maintain the terms of your existing mortgage if you don’t want to refinance. Unlike a traditional loan, a HELOC allows you to borrow, repay, and borrow again—similar to how a credit card works, but with much lower rates. 3. Purchase Plus Improvements Mortgage If you're in the market for a new home and find a property that needs some work, a "Purchase Plus Improvements" mortgage could be a great option. This allows you to include renovation costs in your initial mortgage. How it works: The renovation funds are advanced based on a quote and are held in trust until the work is complete. The renovations must add value to the property and meet lender requirements. This type of mortgage lets you start with a home that might be more affordable upfront and customize it to your taste—all while building equity from day one. Final Thoughts Your home is likely your biggest investment, and upgrading it wisely can enhance both your comfort and its value. Mortgage financing can be a powerful tool to fund renovations without tapping into high-interest debt. The right solution depends on your unique financial situation, goals, and timing. Let’s chat about your options, run the numbers, and create a plan that works for you. 📞 Ready to renovate? Connect anytime to get started!
Owning a vacation home or an investment rental property is a dream for many Canadians. Whether it’s a cottage on the lake for family getaways or a rental unit to generate extra income, real estate can be both a lifestyle choice and a smart financial move. But before you dive in, it’s important to know what lenders look for when financing these types of properties. 1. Down Payment Requirements The biggest difference between buying a primary residence and a vacation or rental property is the down payment. Vacation property (owner-occupied, seasonal, or secondary home): Typically requires at least 5–10% down, depending on the lender and whether the property is winterized and accessible year-round. Rental property: Usually requires a minimum of 20% down. This is because rental income can fluctuate, and lenders want extra security before approving financing. 2. Property Type & Location Not all properties qualify for traditional mortgage financing. Lenders consider: Accessibility : Is the property accessible year-round (roads maintained, utilities available)? Condition : Seasonal or non-winterized cottages may not meet standard lending criteria. Zoning & Use : If it’s a rental, lenders want to ensure it complies with municipal bylaws and zoning regulations. Properties that fall outside these norms may require financing through alternative lenders, often with higher rates but more flexibility. 3. Rental Income Considerations If you’re buying a property with the intent to rent it out, lenders may factor the rental income into your mortgage application. Long-term rentals : Lenders typically accept 50–80% of the expected rental income when calculating your debt-service ratios. Short-term rentals (Airbnb, VRBO, etc.) : Many traditional lenders are cautious about using projected income from short-term rentals. Alternative lenders may be more flexible, depending on the property’s location and your financial profile. 4. Debt-Service Ratios Lenders use your Gross Debt Service (GDS) and Total Debt Service (TDS) ratios to determine if you can handle the mortgage payments alongside your other obligations. With investment or vacation properties, lenders may apply stricter guidelines, especially if your primary residence already carries a large mortgage. 5. Credit & Financial Stability Your credit score, employment history, and overall financial health still matter. Since vacation and rental properties are considered higher risk, lenders want reassurance that you can handle the additional debt—even if rental income fluctuates or the property sits vacant. 6. Insurance Requirements Rental properties often require specialized landlord insurance, and vacation homes may need coverage tailored to seasonal or secondary use. Lenders will want proof of adequate insurance before releasing mortgage funds. The Bottom Line Buying a vacation property or rental can be exciting, but financing these purchases comes with extra rules and considerations. From higher down payments to stricter property requirements, lenders want to be confident that you can handle the responsibility. If you’re considering a second property, the best step is to work with a mortgage professional who can compare lender requirements, outline your options, and find the financing that works best for you. Thinking about making your dream of a vacation or rental property a reality? Connect with us today.
