What is a chattel mortgage?
It finances manufactured homes, business equipment and other movable property
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A chattel mortgage is a type of loan used to purchase movable personal property, such as vehicles or equipment, with the property itself serving as collateral. According to the Consumer Financial Protection Bureau, around 42% of manufactured home purchase loans are chattel loans.
“Chattel mortgages are common in manufactured housing, especially when the home isn’t affixed to land, as well as in agricultural and business equipment financing,” said Matt Schwartz, the co-founder of VA Loan Network in San Antonio, Texas.
Here’s how chattel mortgages work and what you need to know about them before applying.
Chattel mortgages let you finance movable property like manufactured homes or business equipment.
Jump to insightUnlike traditional mortgages, chattel loans are used for personal property, not real estate.
Jump to insightYou may be able to deduct interest and depreciation if the asset is used for business.
Jump to insightHow does a chattel mortgage work?
Though almost half of chattel mortgages are used to buy manufactured homes, you can also use them to finance other movable properties like boats, vehicles and heavy machinery.
Even though it’s called a mortgage, chattel mortgages aren’t real estate loans but rather personal property loans. But, similar to mortgages, it’s backed by collateral. This means that if you fail to make payments, your lender could seize your property and sell it to pay off the remaining amount owed.
Unlike leasing or rent-to-own agreements, a chattel mortgage grants you ownership from the start, so it appears as both an asset for your business and a liability. Until the loan is fully repaid, the lender holds a security interest in the asset, even though you’re listed as the owner.
To get a chattel mortgage, you’ll first apply with a lender and share details about your income, credit score and the asset you plan to buy. Once approved, you’ll take ownership of the asset while making loan payments over time.
Chattel mortgage vs. traditional mortgage
The main difference between a chattel mortgage and a traditional mortgage comes down to what’s being financed. As mentioned earlier, chattel mortgages aren’t used for real estate but instead for movable personal property, like RVs, mobile homes or business equipment.
A traditional mortgage, on the other hand, is for real estate, including land and permanent structures like houses or commercial buildings.
Interest rates and loan terms
“Chattel mortgages typically come with higher interest rates, shorter terms and fewer consumer protections compared to traditional mortgages,” Schwartz said. Their higher interest rates are due to the fact that movable assets typically depreciate more quickly and carry greater risk for lenders.
Chattel mortgages typically come with higher interest rates, shorter terms and fewer consumer protections compared to traditional mortgages.”
And unlike traditional mortgages that have loan terms as long as 30 years, chattel mortgages usually must be repaid within 20 years.
When do chattel mortgages make sense?
Chattel loans aren’t for everyone, but they can make financial sense if you’re buying a manufactured home without land or financing equipment for your business. “Compared to traditional mortgage loans, chattel loans tend to close faster, involve fewer regulatory hurdles and are more flexible for niche purchases,” Schwartz said.
You also don’t need to put up real estate as collateral, which may be appealing for some borrowers.
Which one should you choose?
If you're buying a home that's permanently affixed to land, working with a traditional mortgage lender is usually the better choice. But if you want to buy personal property that isn't tied to land or if you need to finance equipment without using other assets as collateral, a chattel mortgage may be an option worth considering.
Types of property financed with chattel mortgages
Chattel mortgages are mostly used to finance movable personal property, including vehicles and business equipment as well as manufactured or modular homes.
Vehicles
Business owners can finance trucks, vans or trailers with a chattel mortgage. As long as the vehicle is mostly used for business, a chattel mortgage can be a solid way to upgrade your fleet without tying up working capital.
» MORE: Need a traditional auto lender instead?
Equipment
You can use a chattel mortgage to buy tools, heavy machinery, office equipment or anything else essential to your business operations. This arrangement allows you to start using the equipment while still making the most of your cash flow.
Manufactured and modular homes
Chattel mortgages are most commonly used to finance manufactured and modular homes, especially when the home isn’t permanently affixed to land. In these cases, the home itself serves as collateral, not the land it sits on.
» LEARN: What is a purchase money mortgage?
Tax implications of a chattel mortgage
Chattel mortgages have tax advantages, depending on how the property is used. One of the biggest benefits is that you can usually deduct the interest you pay on the loan from your annual income tax return. You can also claim depreciation on the asset itself as long as it’s used for business purposes.
If you’re unsure about anything, check with a tax professional first to make sure you’re not leaving any money on the table.
FAQ
What is an example of a chattel mortgage?
Let’s say you own a small construction company and want to buy a new excavator. Instead of paying the full cost upfront, you can take out a chattel mortgage.
The lender will give you the money to buy the equipment, and the excavator itself is used as collateral. You own the excavator from the start of the loan term, but the lender can take it back if the loan isn’t repaid.
Are chattel mortgages good?
A chattel mortgage is a good option if you need to finance expensive business equipment or other movable personal property. These financing options typically offer lower interest rates than unsecured loans and often come with tax benefits.
What credit score do you need for a chattel mortgage?
Chattel mortgage lenders typically require a minimum credit score of 575.
Why might a business choose a chattel mortgage?
A business may choose a chattel mortgage if it wants to purchase equipment or a commercial vehicle but doesn’t wish to spend the money to buy the asset outright.
Article sources
ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
- Consumer Financial Protection Bureau, “Manufactured Housing Loan Borrowers Face Higher Interest Rates, Risks, and Barriers to Credit, New CFPB Report Finds.” Accessed July 22, 2025.
- Quicken Loans, “Chattel Mortgage: What Is It And Should You Use One?” Accessed July 22, 2025.
