In a conventional mortgage loan, the bank can recover the property from the borrower if he or she defaults on the loan. In a chattel mortgage loan, the bank does not place a lien on the chattel. The lender actually assumes full ownership of the movable property until the loan has been paid off, and then the borrower is able to resume complete ownership of the item.
Depending on the location, a chattel mortgage may have to be recorded in an archive that is available to the public. This allows other entities to know about these chattel mortgages before they move into loan agreements with borrowers who are looking to secure their loans with personal property.
Benefits of Chattel Mortgages
Veterans that take advantage of chattel mortgage loans can benefit from:
– Tax-deductible interest rates.
– Monthly payments that can be conveniently arranged like a traditional mortgage.
– Lower interest rates than loans that are not backed by a security.
Chattel Mortgages for Manufactured Homes
The majority of new mobile homes are not considered real property because they are portable and not permanently attached to the ground. For the manufactured homes that fall into this category, a conventional mortgage is not appropriate, because the land that the mobile home sits on is not owned by its occupant. The mobile home is considered chattel and can be used to secure a chattel mortgage loan. The loan arrangement can still be viable if the manufactured home is relocated.
Chattel Mortgages in Business
Companies often buy new equipment utilizing chattel mortgage loans. The equipment secures the loan for the lender. This allows the seller to finance the equipment and the buyer to utilize the equipment while the loan is being paid off. If the purchaser defaults, the owner can reclaim the machinery and mitigate financial losses by selling it.
Chattel Mortgages for Miscellaneous Items
Chattel mortgage loans are often utilized to finance airplanes, automobiles, and sea vessels. Chattel mortgage loans are especially useful for companies that operate vehicles in their businesses. This kind of loan allows business owners to completely finance a vehicle without dipping into their capital reserves. Chattel mortgages also allow for balloon payments, which can lower monthly payments while leaving a large payment to be made once the loan reaches its maturity.
