What is a Chattel Mortgage?

Welcome to the Investors Trading Academy talking
glossary of financial terms and events. Our word of the day is “Chattel Mortgage”
Under a chattel mortgage, the purchaser borrows funds from the lender to buy a movable property.
The lender then secures the loan with a mortgage over the chattel. Legal ownership of the chattel
is transferred to the lender at the time of purchase, and the mortgage is removed once
the loan has been repaid. A chattel mortgage stipulates that the assets
held as security for the loan cannot be permanently tied to land owned by the borrower. This is
why chattel mortgages are often used for mobile homes.
Chattel loans are also common in the business world. Businesses may use chattel mortgages
to purchase new properties while using chattel as security. This allows the new property
to be used to its fullest and best use without the burden of a lien. A chattel mortgage may
prove to be advantageous to the lender since the lender would be able to seize the chattel
in the event of default and sell it to recover losses from the remaining mortgage.

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