Chapter 8 of 20
Chattel loans versus real-property mortgages
The two dominant financing structures, side by side, and what converting between them involves.
1 min read
A chattel loan is secured by the home as movable personal property. A mortgage is secured by real estate, land plus everything permanently attached to it. Which one applies to you is a function of how the home is titled and situated, not of your preference.
The practical differences run in one direction. Chattel loans typically have shorter terms and higher interest rates, because the collateral is a movable asset that can depreciate. They usually close faster, cost less to close, and ask for less cash up front. Mortgages typically offer longer terms and lower rates, with more paperwork, more cost, and stricter conditions on the home and its foundation.
For the same purchase price, the shorter chattel term produces a higher monthly payment. That is why a home in a community can cost more per month than a more expensive home on owned land, and it is the arithmetic behind Chapter 6.
Converting a home from personal to real property, placing it on a permanent foundation on land you own and completing your state's conversion process, is often the single most valuable financial move available to a manufactured-home owner. It can open refinancing into a mortgage, change how the home is taxed, and change how it appraises. The process and requirements vary considerably by state and the paperwork is easy to get wrong, so it is worth doing with professional help.
Key points
- Chattel: home only, shorter term, higher rate, faster and cheaper to close.
- Mortgage: land included, longer term, lower rate, stricter conditions.
- A shorter term means a higher monthly payment at the same price.
- Converting to real property can open refinancing, and the rules vary by state.
Watch out
Do not assume you can convert to real property later. It requires owning the land, an acceptable permanent foundation, and completion of a state process that has real requirements. Confirm feasibility before buying on the assumption you will convert.