How does a salvage title affect mortgage lending?

A salvage title is issued for vehicles that have been declared a total loss by an insurance company, which often occurs after an accident or significant damage. This designation indicates to lenders that the vehicle has sustained severe damage that exceeds a certain percentage of its value, typically around 75-80%. Consequently, vehicles with salvage titles are viewed as high-risk collateral for loans because they may have substantial unresolved issues or may not hold their value well. Therefore, having a salvage title directly influences the perception of the vehicle's history and condition, confirming that it is not in a standard, insurable condition. Understanding this concept is crucial for mortgage lenders who evaluate the risk associated with providing loans secured by vehicles that may not serve as reliable collateral.