Have you ever heard of a mortgage? Do you know how it works? If the answer is no, then let’s find out some of the basics, how they work, and how you can benefit from them. A Chattel mortgage is a type of loan agreement under which the lender can hold any movable personal property of the borrower as security for the loan. Unlike a traditional loan agreement whereby the lender sets a lien on the property and seizes the property in case the borrower defaults, a mortgage works in a way that benefits both the lender and the borrower.
Under a mortgage, the lender does not represent or own the property, but rather transfers title to the property with conditions until the loan is satisfied. This conditional transfer is nothing but a temporary transfer of title between the lender and the borrower and the borrower’s rights over the property will resume once the loan is repaid. The mortgage applies to all types of movable personal property such as cars, houses, commercial homes and almost all the items that you can get from a conventional loan.
The only difference between a conventional loan and a property loan is the way the lender works with the hypothetical borrower. This option is considered as the best mortgage option by many corporate companies as this would pave way for free flow of working capital and timely financing of their operating activities. Not only corporate homes but also individuals feel advantageous over a conventional mortgage because they do not lose their property in case of default.
Now that we know what a mortgage is, let’s take a look at how it works. Under a mortgage, the lender finances the buyer’s movable property. That is, the lender pays the cost of the movable property that the borrower wishes to purchase or own. Once the property is registered in the borrower’s name, the lender mortgages the property. This mortgage gives the lender a right over the buyer’s property. In the event that the buyer defaults, the lender waits until the end of the loan agreement and after the loan becomes due, the lender transfers ownership of the property to his name temporarily.
In the event that the borrower fulfills the obligations under the loan agreement, the lender removes the mortgage on the property. Once the lender clears the mortgage, the borrower will get full rights over his property. The business methodology has made it more and more popular among companies as well as individuals.