Bridge mortgages are a useful tool when you’re buying a new home before selling your current one, helping you cover the financial gap between closing dates. But because they involve large sums of money and time pressure, they’re also a target for fraud.
To protect yourself from bridge mortgage fraud in Canada, always work with licensed professionals, verify every document, and never bypass legal checks, even if you’re in a rush. The more transparent the process, the safer your financing will be.
Best Ways to Avoid Bridge Mortgage Fraud
Bridge financing comes with unique risks, but those risks are manageable if you take a few essential precautions. The key is to recognize that speed should never come at the expense of security. Here’s how to make sure your bridge loan is 100% legitimate:
1. Work Only With Licensed Mortgage Brokers
Always verify your mortgage broker’s credentials. In Canada, brokers must be licensed by provincial regulators like FSRA (Ontario) or BCFSA (British Columbia). Use official lookup tools to confirm their registration and avoid working with anyone who lacks proper credentials. A licensed broker is bound by professional conduct and disclosure rules, which are your first protection against misleading terms or bad actors.
2. Involve a Real Estate Lawyer Early
Before signing any documents or paying any fees, bring in your real estate lawyer. They’ll ensure the terms are fair, the lender is legitimate, and that there are no traps hidden in the fine print. Your lawyer can also handle the transfer of funds through a trust account, so you’re not wiring money directly to unknown individuals or shell companies.
3. Avoid Unsolicited Private Lenders or “Too-Good” Deals
Fraud often hides behind urgency and unrealistic promises. If a private lender offers instant approval with no paperwork, low interest, and no lawyer involved, it’s likely a scam. Reputable lenders, whether private or institutional, follow due diligence, assess risk, and include legal safeguards. Be especially cautious of bridge loan offers on social media, online ads, or random emails.
4. Get Everything in Writing and Review It Carefully
Never rely on verbal assurances. A legitimate bridge mortgage will come with detailed documentation, including loan amount, interest rate, fees, repayment terms, and penalties. Insist that all terms are clearly stated in writing, and review the agreement with your lawyer before signing. Documentation is your only legal proof if something goes wrong.
5. Stick With Known or Referred Institutions
Your current mortgage lender may offer bridge financing as part of your new home purchase. When available, this is often the safest and most efficient route. If you must go with an alternative lender, choose one referred by your lawyer or a known mortgage broker, not someone you found on an online forum or Facebook group. Trust matters.
Warning Signs You May Be Dealing With Mortgage Fraud
Even if you’re taking precautions, it’s important to watch for common red flags. These are typical behaviors used by fraudsters to create urgency and lure in unsuspecting borrowers. If you notice any of the following, stop the process immediately and consult a legal or financial professional.
- No Paper Trail: If the lender avoids providing written contracts or asks to handle everything verbally, it’s a major red flag.
- Pushes to Skip the Lawyer: Any suggestion to bypass legal review should be an instant deal-breaker.
- Asks for Upfront Wire Transfers: Be cautious of lenders asking you to wire large sums before any documents are signed or verified.
- Unverifiable Credentials: If you can’t confirm the lender or broker through official directories, you’re likely not dealing with a legitimate professional.
Conclusion
Bridge financing is a useful tool, but fraud risks rise when you rush or trust the wrong people. Protect yourself by insisting on licensed professionals, legal oversight, and written documentation. If a deal seems unusually fast, cheap, or informal, walk away.
If you’re considering bridge financing and want a secure, transparent process from start to finish, Pradip Maheshvari can guide you with professional mortgage solutions tailored to your timeline.
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