Mortgage Tips- Collateral

For any loan, the collateral is the security used to back up the loan. In a mortgage, the value of the property is crucial to getting the deal done. Any lender wants the assurance that if the mortgagor (borrower) walked away from their responsibilities, that they would be able to recover all or most of the amount lent in the mortgage, through a sale of the property. When CMHC or GE Capital insure the mortgage for the lenders, they too want to see the value of the property, safeguards the mortgage amount.
To properly assess this value, the lenders may want the property appraised. A certified appraiser these days usually charges $200.00 plus GST for a regular detached home. It can cost more for doing a multi-unit building like a 4-plex, or for remote locations (eg. Smoky Lake, Alberta).
For the same reason, each lender will set their own criteria as to what properties they will or will not lend on. Some lenders feel certain situations may be ‘iffy’ as to the resale value of the property being secured. For example, some lenders will not lend on apartment condos, some will not lend on mobile homes, and some will not lend on one-industry or remote locations.