Is A Mortgage Personal Property?

You can obtain personal property through cash or a mortgage in real estate. While this is cheaper than buying in cash, you have to know the underlying mechanics behind it. And you’re probably sitting there asking yourself, “Is a mortgage personal property?’

A mortgage is a piece of tangible personal property. It is a loan placed on a physical piece of land between a lender and a borrower. Once the mortgage is paid, the borrower becomes the sole owner of the personal property.

Throughout this article, we’ll explain why mortgages are a great piece of personal property. Since it is a tangible asset, we’ll explain how that benefits you as a homeowner. By the end of this post, you’ll have an idea of why getting a mortgage is helpful for first-time homeowners. 

Is A Mortgage Personal Property?

Yes, a mortgage is a form of personal property. The only thing to remember is that the lender temporarily owns the property. The lender will have control over the note, which the borrower agrees to these terms.

Personal property is a form of movable property. A mortgage that’s placed on personal property is called a chattel mortgage. Since it’s viewed as an asset, your lender might consider it when you apply for a mortgage or another loan. 

To explain, it’s any form of asset that you could use in negotiations with a lender. Personal property has two ways of insurance. First, it can be insured by the current value, which accounts for depreciation. Or how much it would cause to replace the property with a newer item. 

  • Tangible: Tangible assets are assets that have physical value. For example, boats, collectibles, and furniture are all tangible. 
  • Intangible: Intangible assets are assets that cannot be physically obtained. For example, stocks, patents, intellectual properties. 

Since you’re taking a mortgage out on a physical home, that is tangible property. So you’re basically taking a loan against the lender. Avoid defaulting on this mortgage, as it will lead to further financial issues and the loss of your property due to foreclosure. 

Another thing to consider is personal property insurance. Homeowners insurance has four primary coverage lines:

  • Personal Liability Coverage: Homeowners’ policy coverage that pays for claims of property damage and bodily injury caused by others. An example of personal liability coverage is a property damage lawsuit or a customer injury lawsuit.
  • Loss of Use Coverage: Loss of use coverage offers protections in living expenses. In addition, it can reimburse you for rental income losses. And it reimburses you for living expenses when a local authority prevents anyone (you or the tenants) from re-entering the property.
  • Personal Property Coverage: This form of insurance protects your high-value items and personal belongings. If there is any theft or damage on the property, the insurance company will reimburse the renter or owner. 
  • Property Coverage: Unlike personal property coverage, this one is more directed towards the entire property itself. It protects the structures and your home if it is damaged by a peril that’s within its coverage. 

Certain limits can be placed on your home based on personal property coverage. These limits can be difficult for you to get coverage for valuable items such as antiques, art, jewelry, etc. Fortunately, you’ll be able to address the coverage gap by placing personal property insurance on your insurance policy

What is a Chattel Mortgage?

A chattel mortgage is a loan placed on a mobile home. That mobile property, also known as a “chattel,” acts as the loan collateral. Like any form of property, you’ll have to be diligent in your payments. 

If you’re not able to pay off a chattel mortgage, the lender has the right to your mobile home. However, if you pay the chattel mortgage completely, you have 100% ownership of the property. 

Types of Tangible Assets

Fixed Assets

Fixed assets are assets that companies use for their business operations longer than a year. The assets are in a PP&E (Property, Plant, and Equipment) recorded on a balance sheet. These assets can include machinery, buildings, office furniture, etc. 

Revenue made by tangible assets is recorded on a company’s income statement. You’ll need fixed assets so the business can run continuously.  

Current Assets

Current assets use items such as marketable securities, inventory, and cash. The items are made in a year and can be sold to have cash during emergencies. 

Why Should I Get Personal Property Mortgage

Personal Enjoyment

Buying a property can have psychological benefits. For instance, getting a mortgage on a high-quality home will give you and your family a safe place to live. 

Getting a tangible personal property offers both utility and immediate satisfaction. And you’ll have future consumption and property value increase due to price appreciation. This isn’t likely through intangible assets. 

Liquidity

When taking out a mortgage, the property’s equity is converted to cash. This helps provide liquidity and reduces risk. 

Home Ownership

Getting a mortgage allows you to buy a home without paying in cash. Usually, you’ll have to make a down payment, but this is only for a portion of the price. 

Using a mortgage to buy personal property frees up your income for better improvements (i.e., remodeling projects). A mortgage can give you funding access if you need money for an emergency or for home improvements. 

How Does Scheduled Personal Property Insurance Help?

Getting scheduled personal property insurance can be added to your current homeowner’s insurance policy. As a result, this insurance option gives you protection against risks. Also, it increases your coverage limit for items of high value. 

Once your valuables are scheduled, you’ll benefit from increased coverage. And you’ll be able to place a lower deductible for your listed items. This means that you’ll have access to personal property insurance during an emergency. 

Conclusion

Yes, a mortgage is a piece of personal property. When taking out a mortgage, always try to account for any monthly or hidden fees. So, you’ll have a piece of personal property to call your own.