A chattel includes any personal possession with substance, with the exception of land and fixed improvements thereon. Thus a chattel could be any tangible, movable asset according to Oxford Languages. We discuss how personal chattels work in practice as security for mortgages in this post.
Where Does the Word Chattel Come From?
The word ‘chattel’ comes down to us from the Latin word ‘capitale’ meaning ‘thing’. In those days, the ancient Romans used the word to refer to movable property, as in ‘I packed my things in my suitcase’ perhaps.
So to recap thus far, chattels are personal property that is not tied to a particular location. This includes:
- Any movable item such as a car, caravan, prefabricated shed, or mobile home.
- But a chattel could also be an item as small as a hatpin, or as soft as a cashmere jersey.
How Personal Chattels Work to Raise Cash
We could sell one or more of our chattels if we needed to raise cash, although urgent sales seldom attract best prices. Therefore, we might prefer to raise a chattel mortgage loan against the security of a chattel. This is a good example of how personal chattels work as stores of wealth nowadays.
What Is This Old Car Worth © Avery Associates
Collectibles such as jewellery, postage stamps, old cars, antique furniture and the like are all good examples of this principle in action. However, it can be difficult to strike a fair deal when the chosen item is rare, or seldom traded in public.
Avery Associates has a panel of professional valuers in good standing with the London auction market, where our experience is valued and our independent assessments are appreciated.
Why not ask us for our considered opinion if you are negotiating a chattel mortgage, or need to sell an item out of hand. Then you could close the deal with the assurance that the value is realistic, assuming open market conditions prevail.
Let’s Pause a Moment and Reflect At This Point
A chattel is any movable personal possession. However, this does not mean that every chattel is suitable collateral for a chattel mortgage. The item must hold value at least as great as the borrowed sum. This value is best determined by an independent assessor, in the interests of a fair deal on both sides.
Value Is in The Eye of The Market (Image ©Avery Associates)
How a Personal Mortgage With Chattels Works
A chattel mortgage is a formal arrangement with an element of risk for both parties:
- If the mortgagee (borrower) defaults, then they forfeit their security.
- The mortgagor (lender) must protect the security from damage or loss.
The two parties are therefore at risk to some extent, the instant the lender advances the loan and takes ownership of the security. This element of risk continues until the final payment, followed by return of the security and signing the deal as complete. In summary then:
- The borrower makes regular repayments including interest on the outstanding capital sum.
- The duration of the loan, and the payment intervals may vary as agreed by the two parties.
Isn’t This the Same As a Home Mortgage Agreement?
No not all all – although there may be similarities – because this is not how personal chattels work when used as securities for loans. The lender holds title for the home (or vehicle) purchased, and may sell it to recover their losses in the event the borrower defaults.
By comparison, a chattel mortgage lender may have no control over how the borrower spends the money advanced in this manner. They only have the security item(s) as back up. This simple fact reinforces the need to ensure that the security advanced adequately covers the extent of their risk.
A Beloved Picture But What Is It Worth © Avery Associates
How Personal Chattel Mortgages Close Out in Practice
Chattel mortgages may make provision for ‘balloon payments’ to settle earlier. Others may stipulate regular payments through to the end as agreed. Whichever is the case, the chattel mortgage is settled with the final payment, and return of security goods to the borrower.
When Personal Chattel Mortgages Work Best
Personal chattel mortgages need to be carefully phrased between parties who know and trust each other. This trust should be stronger when the value of the security matches the borrower’s obligation. There is a good case for using an independent assessor to value chattel(s) used as security.
Avery Associates established in London in 1978 as a group of accredited property surveyors and professional valuers. Since then we have grown to a national team with an expanding and loyal customer base.
Speak to us soon to experience the quality of polished service that ensures our ongoing success in London and the Southeast of England. You should find it easier to arrange a chattel mortgage with an Avery Associates valuation in your hand.
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