Mortgage Terms Explained: Collateral
| Money : Mortgages You might hear the phrase collateral used in relation to a mortgage and the mortgage process. Collateral refers to a property that is used as a security against the debt. Thus if the borrower cannot pay back the mortgage loan, the lender can legally take the collateral and sell to recover the debt. Thus the collateral acts as a means of security for the lender that even if the borrower defaults they can still sell the collateral to gain costs.
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