I just saw a TV ad for mortgages, and a Nomic-style legal scam caught my eye. Can anyone poke a hole in this plan for instant free money? The Chelsea Building Society offers a mortgage that's a fixed rate (the rate is largely irrelevant), the arrangement fee is £545, you get cashback of 6% of the loan amount when you make your first monthly payment, and there's a 5% early repayment fee. If you'd like to play along at home and work out the scam for yourself, you now have all the information, don't read the next paragraph.
So, let's say you borrow £150000 on this mortgage. You're down £545 for the arrangement fee. You wait a month, there's £811 interest, so you're down £1356 total. You get your 6% cashback of £9000, so now you're up £7644. Now you pay off the entire rest of the borrowed amount, which incurs a 5% penalty of £7500, and ta-da, you're up £144 at the end of the transaction. For each additional £10000 you borrow with this scam, you get an extra £46 absolutely free. But wait, there's more! While you've borrowed the £150000, you could put it in some sort of reasonable interest bearing account, thus offsetting around half of the one-month interest penalty, which makes your scam-money £71 per £10000, which breaks even at borrowing £77000, and, eg. puts you up about £500 if you borrowed £150000.
The catch, of course, is that you need to be able to get the mortgage for the large amount without actually buying a house with it at the same time. But still, comical numbers.
[06:42]
|