Chattel Mortgage
Definition and meaning of Chattel Mortgage in real estate.
A chattel mortgage is a loan secured by personal property, such as machinery, vehicles, or manufactured homes, rather than real property like land or permanent buildings.
In more detail
In a chattel mortgage, the lender holds a lien against the movable asset used as collateral, giving them the right to repossess it if the borrower defaults. This type of financing is common for purchasing mobile homes located on leased land, as well as agricultural equipment and construction machinery.
Because personal property tends to depreciate quickly, chattel mortgages typically have shorter terms and higher interest rates than traditional real estate mortgages. The transaction is usually registered through a public filing, such as a Uniform Commercial Code filing, to protect the lender's interest.
Key facts
| Category | Mortgages & Financing |
|---|---|
| Collateral | Movable personal property rather than land |
| Commonly used for | Manufactured homes on leased land, vehicles, and heavy machinery |
| Watch out for | Higher interest rates and shorter terms than standard mortgages |
A buyer purchases a manufactured home to place in a mobile home park where the land is rented, securing a chattel mortgage to finance the home itself since he does not own the underlying land.
Frequently asked questions
Can I get a chattel mortgage for a mobile home?
Yes, a chattel mortgage is one of the most common ways to finance a mobile or manufactured home when you do not own the land on which the home sits.
What happens if I default on a chattel mortgage?
If you default on the loan, the lender has the legal right to repossess and sell the personal property collateral to recover the outstanding debt.
Related terms
Sources & references
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