What is a Chattel Mortgage?

A chattel mortgage is a type of mortgage that is secured by collateral other than the physical building itself. This type of mortgage is not very common, but it is used occasionally. Here are the basics of the chattel mortgage and how it works.

Chattel Mortgage

With this type of loan, an individual will borrow a certain amount of money from a lender. The borrower will use personal property that they have to secure the loan instead of the actual real estate itself. This means that the lender will use things like a car, a boat, collectibles and any other type of personal property that they might have to secure the loan. 

Property

With this type of mortgage, the property that is securing the loan cannot be attached to the physical property in any way. It has to be freestanding property that can be removed. If the loan goes into default, the lender is going to come and repossess all of the physical property that was previously securing the chattel mortgage. The lender can then take the property and sell it in order to recoup the costs of the loan. 

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