Chattel Mortgage: Definition, Types, and Examples

Key takeaways

• A chattel mortgage is a loan to buy movable personal property (chattel) where the property secures the loan and the lender retains an ownership interest until the loan is repaid.
• Common uses include financing manufactured/mobile homes located on leased land and business equipment.
• Chattel mortgages often have higher interest rates, shorter terms, and fewer consumer protections than traditional real-estate mortgages.
• If the borrower defaults, the lender can repossess and sell the chattel to recover the loan balance.

What is a chattel mortgage?

A chattel mortgage finances movable personal property rather than real estate. The financed asset — for example, a manufactured home, vehicle, aircraft, boat, or farm machinery — serves as collateral. The lender holds an ownership interest (or a security interest) until the borrower pays off the loan.

Other common names include security agreement, lien on personal property, or movable hypothecation.

Types of chattel mortgages

Mobile and manufactured home loans

When a manufactured or mobile home is not attached to land owned by the buyer (for example, it sits on leased land), it is treated as personal property. In that case, financing typically takes the form of a chattel mortgage. These loans remain tied to the home even if it’s relocated.

Equipment loans

Businesses use chattel mortgages to buy long-lived movable assets such as construction equipment, agricultural machinery, or commercial vehicles. The borrower uses the equipment while the lender retains a security interest until repayment; on default the lender can repossess and sell the equipment.

Government programs may guarantee or support some chattel-style financing (for example, certain small-business equipment loan programs), but private lenders originate most chattel loans.

How a chattel mortgage differs from a traditional mortgage

• Collateral type: Chattel mortgages secure movable personal property; traditional mortgages secure real property (land and buildings).
• Ownership and interest: In a chattel mortgage the lender holds an ownership/security interest in the chattel until full repayment. In a standard mortgage the borrower owns the property while the lender holds a lien.
• Terms and cost: Chattel loans often have shorter terms and higher interest rates than conventional mortgages, and they typically carry fewer consumer protections.
• Remedies on default: Both allow repossession/liens, but enforcement procedures and protections differ by property type and jurisdiction.

Common examples

Assets commonly financed with chattel mortgages include:
* Manufactured/mobile homes (on leased land)
Vehicles, boats, and aircraft
Farm and construction equipment
* Commercial machinery

Practical considerations

• Interest rates and terms: Expect typically higher interest and shorter loan durations than with real-estate mortgages, which can mean larger monthly payments.
• Default risk: If you default, the lender can repossess and sell the chattel; recovery and redemption rights vary by state and asset type.
• Down payment: Requirements vary by lender, borrower credit, and program. For government-insured programs, minimums can range (for example, some programs require 5–10% down depending on credit).
• Tax treatment: Interest on a chattel mortgage may be tax-deductible in certain circumstances (similar to other loan interest), but this depends on use (personal vs. business) and local tax rules.

Registration and legal requirements

Recording requirements differ by asset type and jurisdiction. Examples include:
* Some states require public filing or registry entries for chattel mortgages on manufactured homes so third parties can discover existing security interests.
* Security agreements for aircraft must be recorded with the Federal Aviation Administration’s registry.

Always check state and federal rules that apply to the specific type of chattel and consult a lender or attorney about registration, priority, and enforcement consequences.

Where to obtain a chattel loan

Chattel loans are available from banks, credit unions, specialty lenders, and online lenders that focus on specific assets (e.g., manufactured homes, aircraft, equipment). Some government programs guarantee eligible loans made by approved private lenders.

Bottom line

A chattel mortgage is a secured loan for movable personal property. It enables buyers to use valuable chattel while spreading payment over time, but it commonly comes with higher costs, shorter terms, and fewer consumer protections than conventional mortgages on real property. Before taking a chattel loan, compare lenders, confirm registration and repossession rules for your asset, and assess tax or program eligibility.