What is the collateral on a mortgage?

The collateral is the property being financed. The lender registers a legal charge against the home's title, giving them the right to take and sell it if you default on the loan.

What happens to collateral if I default?

If you default, the lender can enforce their claim on the collateral, which in a mortgage may lead to foreclosure or a power of sale, allowing them to sell the home to recover the outstanding debt.

What is a collateral charge mortgage?

It is a mortgage registered for an amount that can exceed your current loan, letting you borrow more against your home's equity later without re-registering. It can be convenient but may make switching lenders harder.

Mortgage Glossary

What is Collateral?

Collateral is an asset a borrower pledges to a lender to secure a loan. With a mortgage, the home itself is the collateral, so the lender can take and sell the property if the borrower defaults. Pledging collateral lowers the lender's risk and is what makes mortgages possible at relatively low interest rates.

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Quick answer

Also known as: security, pledged asset

Key points

Collateral is an asset pledged to secure a loan
In a mortgage, the home itself is the collateral
The lender registers a charge against the property's title
If the borrower defaults, the lender can seize and sell the collateral
Secured loans like mortgages carry lower rates than unsecured debt
Collateral charge mortgages can allow further borrowing against equity

Collateral explained

Collateral is something of value that a borrower offers a lender as security for repaying a debt. If the borrower fails to repay, the lender has the legal right to seize the collateral to recover what is owed. This security is what defines a secured loan.

In a mortgage, the property being financed serves as the collateral. The lender registers a charge against the title, giving them a claim on the home. Because the loan is backed by real estate, mortgages typically carry lower rates than unsecured borrowing.

What a Collateral is for

Collateral reduces the lender's risk by giving them a fallback if the borrower cannot repay. This security lets lenders offer larger loans, longer terms, and lower interest rates than they could on unsecured credit.

How it can help you

Because your home backs the loan, you can borrow a large sum at a comparatively low rate. Some lenders also offer collateral charge mortgages that let you borrow more against your equity later. Lenderoo compares 40+ lenders for free so you can find the structure that suits your plans.

When it comes up

A homeowner uses their property as collateral to secure a mortgage, and later taps the same equity through a home equity line of credit, again using the home as security for the additional borrowing.

Example: The home as collateral

Dev borrows $350,000 to buy a house worth $440,000. The house is the collateral, and the lender registers a charge against its title.

If Dev stops making payments and defaults, the lender can use its claim on the property to recover the debt. Because the loan is secured by the home, Dev receives a lower interest rate than an unsecured loan would offer.

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Questions & answers

Collateral: frequently asked questions

Common questions Canadians ask about collateral.

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Related mortgage terms

Default

Failure to make mortgage payments as agreed

Read definition

Equity

The difference between a home's market value and outstanding mortgage balance

Read definition

Foreclosure

Legal process where a lender takes possession due to non-payment.

Read definition

HELOC (Home Equity Line of Credit)

A line of credit secured by home equity.

Read definition

Title

The legal record of who owns a property and any claims or charges registered against it.

Read definition

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Mortgage Glossary

What is Collateral?

Find my best mortgage Back to glossary

Quick answer

Also known as: security, pledged asset

Key points

Collateral is an asset pledged to secure a loan
In a mortgage, the home itself is the collateral
The lender registers a charge against the property's title
If the borrower defaults, the lender can seize and sell the collateral
Secured loans like mortgages carry lower rates than unsecured debt
Collateral charge mortgages can allow further borrowing against equity

Collateral explained

What a Collateral is for

How it can help you

When it comes up

A homeowner uses their property as collateral to secure a mortgage, and later taps the same equity through a home equity line of credit, again using the home as security for the additional borrowing.

Example: The home as collateral

Dev borrows $350,000 to buy a house worth $440,000. The house is the collateral, and the lender registers a charge against its title.

Have a question about collateral?

Lenderoo shops 40+ lenders for free and matches you with a mortgage professional who explains every term — and finds your best rate.

Get pre-approved free Talk to an expert

Questions & answers

Collateral: frequently asked questions

Common questions Canadians ask about collateral.

Keep learning

Back to full glossary

Understand your mortgage with confidence

Lenderoo shops 40+ lenders for free and pairs you with a mortgage professional who keeps the jargon simple — and gets you a great rate.

Find my best mortgage Explore the glossary