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Basics of Getting a Chattel Mortgage in Arizona

Basics of Getting a Chattel Mortgage in Arizona

April 17, 2023 by X2 Mortgage

A mortgage is essential for most people because they can't afford to pay for a house out of pocket. It’s a simple process, and many types of mortgages are available to people who want to buy a house, including chattel mortgages. Unlike traditional mortgages, a chattel mortgage is a home loan secured by “personal property”, such as a mobile home, manufactured home, or even a modular home.

There is over 1,500+ manufactured, modular, and mobile home parks in Arizona that have homes on leased land. Fortunately, X2 Mortgage offers Chattel loans but few people know how they work, so we will discuss the details in this article.

What Is a Chattel Mortgage?

A chattel mortgage is a legal agreement where a borrower uses a movable property as collateral for a loan. The borrower retains asset ownership while the lender has a lien until the loan is fully repaid. These are super popular for obtaining a loan on a manufactured home on leased land or homes that have a lot fee. Chattel mortgages can also be common in business and commercial lending, particularly for equipment, vehicles, and other movable assets.

The process of obtaining a chattel mortgage involves several steps. First, the borrower must identify the asset they wish to use as collateral. The lender will typically require the borrower to provide proof of asset ownership and may also require an appraisal to determine its value.

Once the loan terms are agreed upon, the borrower will sign a chattel mortgage agreement which outlines the loan amount, interest rate, repayment schedule, and other terms and conditions. The lender will then register the mortgage with the appropriate government agency, which protects their interest in the asset.

If the borrower defaults on the loan, the lender can repossess the asset and sell it to recover the outstanding debt. However, the borrower can redeem the asset by paying the outstanding debt and associated costs. The lender must also provide the borrower with a notice of default and an opportunity to cure it before taking possession of the asset.

The Benefits of a Chattel Mortgage

As with any other mortgage option, chattel loans offer various benefits. For one, it allows someone to finance a manufactured home that is sitting on a piece of land that is not owned like a traditional home – but leased or rented. This is extremely popular in communities managed by an HOA where there is a monthly lot fee or what’s considered “leased land”.

Another benefit of a chattel mortgage is that it typically has lower interest rates than unsecured loans since the lender has a secured interest in the asset. If you compare rates from a personal loan vs a chattel loan, it’s much more cost effective to go the chattel route. This can save people money on interest payments over the life of the loan.

Chattel mortgages also offer greater flexibility than other types of loans. For example, the loan terms can be customized to meet the borrower's specific needs, including the repayment schedule, interest rate, and other terms and conditions.

How Is a Chattel Mortgage Different from Traditional Mortgages?

A chattel mortgage differs from traditional mortgages in several ways. First and foremost, a chattel mortgage is secured by personal property, while a traditional mortgage is secured by real estate on owned land. With a traditional mortgage, the lender has a lien on property fully affixed to the land until the mortgage is fully paid off. In contrast, with a chattel mortgage, the lender has a lien on the personal property used as collateral.

Another critical difference between chattel and traditional mortgages is the application process. With a traditional mortgage, the application process is often lengthy and complex, involving a thorough review of the borrower's credit history, income, and other financial information. In contrast, the application process for a chattel mortgage is often more straightforward and streamlined since the asset used as collateral is the primary consideration.

How Chattel Mortgages Are Used

Chattel mortgages are commonly used by people who want to buy a mobile home. They are also used by businesses that want to purchase equipment or other assets, thanks to the advantage of the borrower to finance the purchase of personal property without putting up real property as collateral.

Chattel mortgages can also be used to refinance existing debt or obtain cash for other purposes. In this case, the borrower can use their personal property as collateral to secure a loan. This can be useful for individuals needing quick cash access but not wanting to sell their assets.

The Tax Implications of a Chattel Mortgage

One of the leading tax implications of a chattel mortgage is the deduction of interest expenses. The interest paid on a chattel mortgage is tax-deductible, meaning people can reduce their taxable income by the interest paid on the loan. This can lead to significant tax savings for people that use chattel mortgages to finance their assets.

Another tax implication of a chattel mortgage is that people must know the depreciation rules when using a chattel mortgage. Depreciation is the gradual decrease in the value of an asset over time. When someone purchases an asset using a chattel mortgage, they are entitled to claim depreciation on the asset as a tax deduction. However, the amount of depreciation that can be claimed will depend on the asset type and the loan term's length.


A chattel loan is an excellent option if you're looking to finance the purchase of a manufactured home on leased land. However, you must understand the rules and regulations surrounding them to make informed decisions and maximize the tax benefits available.

If you want to buy a home in Arizona, X2 Mortgage can help you! Based in Chandler, AZ we offer chattel loans with affordable rates and reasonable terms to get you closer to your dream home. Call us today at (480) 992-4200 to apply!

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