Collateral Security is any additional property or assets you own that can provide additional security for your loan.
Collateral security is usually enforced with a “blanket mortgage”. This mortgage is registered against the subject property, which is the property being built and other approved properties, like your principal residence or a rental property. Why would a lender want collateral security? The following reasons are usually the main reasons why we would look at requesting collateral security.
- You don’t have 25% of the project to begin construction and your loan to cost is very high. Then we look at your assets and try to find that 25%.
- The project is located in a remote or rural area.
Those are the main reasons but there may be other factors involved as well. Generally if a lender can get collateral security, they will feel more comfortable approving the loan.