A chattel loan is for personal property, unlike a traditional mortgage for real estate. The blog explains how chattel mortgages work for movable assets like mobile homes or equipment, using the structure itself as collateral, not the land it sits on. This makes them suitable for homes on rented lots but results in higher interest rates and shorter terms. In contrast, a traditional mortgage finances both the home and land together, offering lower rates and building long-term equity.

In this guide, we’ll explore:

• The core definitions of each loan type
• When and why each is used
• Side-by-side comparisons
• Real-world payment examples
• Pros and cons
• Practical tips to help you choose the right loan for your situation

What Is a Chattel Loan?

A chattel loan is a personal property loan used to purchase movable assets—often referred to as “chattel.” These include manufactured homes (without land), modular homes, mobile homes on rented lots, RVs, and even heavy equipment.

Unlike a traditional mortgage that ties financing to both the home and the land beneath it, a chattel loan finances only the movable structure.

Key Features:

• The home or structure is the collateral, not the land.
• Typically has shorter loan terms (15–20 years).
• Interest rates are higher due to greater lender risk.
• Easier approval for borrowers with lower credit scores.
• Often used in mobile home parks or leased land arrangements.

What Is a Traditional Mortgage?

A traditional mortgage is a secured loan that finances real property—land and any permanent structures built on it. This includes site-built homes, townhomes, and manufactured homes permanently affixed to land you own or are purchasing.

Key Features:

• The land and home together act as collateral.
• Typically comes with longer loan terms (15–30 years).
• Offers lower interest rates than chattel loans.
• Has stricter qualification requirements.
• Builds home equity faster due to better terms and lower interest.

Example: You’re buying a manufactured home, placing it on a foundation on land you own. You’re eligible for a traditional mortgage.

Side-by-Side Comparison: Chattel Loan vs. Traditional Mortgage

Feature	Chattel Loan	Traditional Mortgage
Type of Property	Movable homes, RVs, equipment	Site-built or affixed homes
Land Ownership Required	❌ No	✅ Yes
Collateral	Home/structure only	Home + land
Interest Rates	7%–13% (typically higher)	6%–8% (typically lower)
Loan Term	15–20 years	15–30 years
Closing Costs	Lower	Higher
Approval Criteria	Less strict	More strict
Equity Build-up	Slower	Faster
Refinancing Options	Limited	More accessible

Real-World Cost Example

Let’s break down what these loans look like in practice:

Scenario:

• Purchase Price: $90,000
• Down Payment: 10% ($9,000)
• Loan Amount: $81,000

Traditional Mortgage:

• Term: 30 years
• Interest Rate: 6.5%
• Monthly Payment: ~$512
• Total Interest Paid: ~$103,320

 Chattel Loan:

• Term: 20 years
• Interest Rate: 9.5%
• Monthly Payment: ~$760
• Total Interest Paid: ~$101,400

Even though the chattel loan has a shorter term, the monthly payments are significantly higher, and you have less flexibility in refinancing.

When to Choose a Chattel Loan

Chattel loans are most beneficial in the following cases:

• You’re purchasing a manufactured or mobile home that will be placed on rented land.
• You’re buying a tiny home or RV that will not be permanently installed.
• You need faster processing or have lower credit and don’t qualify for a mortgage.
• You’re using the structure for business or temporary residence purposes.

When to Choose a Traditional Mortgage

A traditional mortgage makes sense if:

• You own or plan to buy the land along with the home.
• Your manufactured or modular home is permanently affixed and meets HUD or local standards.
• You’re looking for better long-term investment value.
• You want to build equity and potentially refinance down the line.
• You qualify based on credit score, income, and debt-to-income ratio.

Pros and Cons

Chattel Loan Pros:

• Easier and faster approval
• Lower upfront fees
• Good for movable homes or equipment

Chattel Loan Cons:

• Higher monthly payments
• Limited refinancing options
• Less equity build-up

Traditional Mortgage Pros:

• Lower interest rates
• Long repayment terms
• Builds wealth through equity

Traditional Mortgage Cons:

• Higher closing costs
• Stricter underwriting standards
• Requires land ownership or purchase

Key Questions to Ask Before Choosing

1. Do I own or plan to own the land?
2. Is the property permanently installed or movable?
3. What are my monthly budget constraints?
4. Do I plan to live in the home long-term?
5. Is resale value or equity growth important to me?
   

FAQs

Can I refinance a chattel loan into a mortgage later?

A: Yes, if the home is permanently installed on land you own and meets lender requirements, you may be able to refinance.

Is a chattel loan harder to get?

No. In fact, it’s usually easier to qualify for than a traditional mortgage—though it often comes with higher rates.

Do traditional mortgages cover mobile homes?

Only if the home is permanently affixed and classified as real property, not personal property.

Are chattel loans eligible for government-backed programs?

Not typically. FHA, VA, and USDA loans usually require the property to be real estate.

Final Thoughts

The choice between a chattel loan and a traditional mortgage boils down to three key factors: property type, land ownership, and long-term goals. If you need a quick, flexible solution for a movable home, a chattel loan can be the right fit. But if you’re planning to build equity and stay long-term on land you own, a traditional mortgage is likely the better financial path.