FAQ

In relation to a Chattel Mortgage for the purchase of business equipment, the mortgage is simply the name for the loan. The lender is extending a mortgage or loan for the chattel being the equipment. In contemporary language, it may simply translate as Equipment Loan. The mortgage has the same connotation and financial meaning as a Home Loan Mortgage but is more commonly associated with or recognised in association with a home loan. But a home mortgage can be structured in more complex terms than an Equipment Chattel Mortgage. An Equipment Chattel Mortgage is a simple loan format: the lender uses the equipment as security for the money extended in the loan and the borrower repays the loan in equal monthly repayments over the fixed loan term. It is versatile enough to cover a wide range of equipment and many business structures.

This is one of the most commonly asked questions in regard to Chattel Mortgage. Chattel is a highly contemporary term that is used in financial documents and across the legal profession in a range of contracts and agreements. It simply refers to moveable property or belongings. Possessions or items that are not real property or real estate such as houses. The equipment being purchased is the actual Chattel, simple as that. It can also include trucks, vehicles and other business assets. The chattel is the equipment and the mortgage is the loan. Possibly as a result of the confusion that the name Chattel Mortgage can cause, many of the major banks now refer to Chattel Mortgage as Equipment Loan or Heavy Equipment Loan. If you are browsing a bank website for information on Chattel Mortgage and can’t find it, look for Equipment Finance or Loan.

Finance for equipment is available with Chattel Mortgage may be a suitable finance product for your requirements. Loans are available for all types of equipment loans. Chattel Mortgage is a versatile type of finance that can suit many business set-ups and sizes. It provides tax deductions through the depreciation of the equipment in line with ATO rulings which currently include IAWO and temporary full expensing. Deciding if it is the best type of finance for your business requires consideration of your business structure, financial objectives, accounting method and how your business approaches GST and balance sheet strategy. These issues are best discussed with your accountant.

Yes in effect it is a secured loan. With a Chattel Mortgage, the lender accepts the equipment as security against the loan. The borrower repays the loan over the loan term in equal monthly instalments and repayments. If the borrower defaults on the loan and fails to meet their repayment schedule, the lender has the legal right to repossess the equipment. So the ‘secured’ reference is in relation to security for the lender. This type of loan format is quite a simple and universally accepted format across the finance industry. It provides lenders with assurance that the finance extended is secured. In some cases, an individual lender may not accept a piece of equipment as acceptable security for a Chattel Mortgage. This may occur in regards to some used equipment where the lender perceives the value or loan amount requested does not reflect the value in respect of the age/condition of the equipment.