Chattel Mortgage

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DEFINITION of 'Chattel Mortgage'

A term used to describe a loan arrangement in which an item of movable personal property is used as security for the loan. A chattel mortgage is a loan that is secured by chattel rather than by real property. In a traditional mortgage, the loan is secured by the property itself. With a chattel mortgage, the lender holds a lien against the movable property (chattel) until the loan has been satisfied, at which point the borrower resumes full control of the chattel.

BREAKING DOWN 'Chattel Mortgage'

A chattel mortgage is an option for mobile homes that are located in parks and leased land, where the home is not financed with the land. The mobile home, since it can be moved from one location to another, serves as security for the loan. 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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