Chattel Mortgage

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Chattel mortgage

What is mean a chattel mortgage?

This type of loan is used when a person has a small income. Loan with collateral, on which the house or car acts as security for the loan. Such an asset can be like a home that isn`t perpetually attached to the land “manufactured home”. A chattel mortgage can as well be used to buy homes that have been placed in community leased lands, personal rental sites, land that owner is still paying for or owns outright or can be on family-owned land. Chattel means that the property is movable, but this does not distinguish it too much in terms of conditions.

Loans mortgage has the same structure as generally accepted fixed-rate mortgages or such as home loans. Generally, Chattel means the asset, equipment or any security item to the borrowed loan while a mortgage means a loan. In contrast a traditional hire purchase this type of loan provides one with immediate ownership, and thereafter one starts to pay the housing loan from the generated income from the asset in your business.

The lowest interest rates on mortgages are offered by banks:

BPI

 

BPI
Up to 80% of assessed value
from 5 to 21 days
Interest rate
5.88% APR

Metrobank

 

Metrobank
PHP 200000 – 80% of purchase price
from 5 to 21 days
Interest rate
5.88% APR

CTBC Bank

 

CTBC Bank
PHP 500000 – 25000000
from 5 to 21 days
Interest rate
6.75% APR

The advantages of this type of housing loan:

  • 1. The housing loan repayment can be structured over term range which is usually a period from 2 to 5 years.
  • 2. Usually the interest rates re lower for these housing lends when compared to the unsecured loans and could be fixed or varied.
  • 3. The repayment has a fixed rate, i.e. it can be fixed to fit your best cash flow season or be fixed to the same amount monthly.
  • 4. At the end of the term, the residual payment can be set so that it can lower the monthly repayment.
  • Balloon payment?

    A residual is a payment that remains unpaid until the end of the agreement. Therefore, if the balloon payment is high, this will outcome in a smaller monthly payment. You should not also note that high balloon payment increases the interest amount to be paid over the period of loan since you will not be paying the principal down as quickly as it should be. One can choose to have the residual payment if it’s preferred to have repayments that are lower for the purpose of cash flow. It is also advisable to make sure that the agreed-upon balloon payments are manageable at the end in cases where you will want to sell the asset in order to pay off the finance.

    Implication towards tax

    With this type of mortgage, services and goods inclusive of purchase of an asset or a housing are financed, and one is entitled to request a claim for the upfront input to the tax credit. You also have the capability to claim the depreciation costs or interests depending on the amount used in the housing. It’s advisable to ask for professional guidance from an accountant with regard to the tax impacts and other circumstances. Also, some companies offer the option of refinancing existing mortgages that you took out at a higher interest rate from another Bank.

    Is there an alternative? How does a chattel mortgage work?

    As with the agreement with the financier, it is very advisable to measure the time you are expecting to use the financed asset in the business, this makes the expectation of cash flow equally effective. The best possible packages for finance will come down to agreeing on both the cost of the asset and the charges of the finances. Saving money in the asset financing enterprise may normally come down to the personal financing amount and the total repayments and not necessarily the rates that are cheapest. These two aspects should be considered as separate during comparison of the options. Another important factor is finding out whether there are other additional fees that are charges for managing the finance and control it within the term. Housing loans is a very good option for those who want to provide their families with good housing, but cannot afford it because of the low wages.

    Useful mortgage questions:

    1) Will be a chattel mortgage, the right housing loan, an option for me?

    2) Will the housing lend interest rates remain constant throughout the period of a chattel mortgage?

    3) How do I get a chattel mortgage?

    4) What are the interest rates of these loans for the Philippines?

    5) What types of personal property can be suggested for provision a chattel mortgage?

    6) Why do lenders prefer chattel loans /mortgages compared to the housing loans?

    7) What are the key factors of getting a chattel loans? E.g. personal credit scores.