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Mortgages

What is a Chattel Mortgage?


Chattel Mortgage is a loan that can be obtained from a bank of financial institution by keeping a personal property as a security. However, the security in this case is not an immovable property such as a building, real estate property or any fixture that is permanent.
The security is a moveable property which can be removed without affecting any real estate or free hold property. The character of Chattel Mortgage immediately changes once the moveable property given as a security is replaced by a fixed property. Since no regulations concerning this transformation exist in Canadian laws, the terms of the loan are determined by the situation. The moveable security provided helps in determining the outcome of such cases.

What are 3 Common Methods of Obtaining Loans against Moveable Personal Property?


Chattel Mortgage is one among the three most common methods of obtaining loans against a moveable personal property. The other two methods are conditional sales contract or a lease. They are usually accompanied by the purchase of the security itself. Products that are usually purchases using this type of credit are computers, photocopying machines and home theatres.
The definition given by Wikipedia will provide you with a clearer understanding of what Chattel Mortgage is.
It is the legal term for a type of loan contract used in some states with legal systems derived from English law. Under a typical chattel mortgage, the purchaser borrows funds for the purchase of movable personal property (the chattel) from the lender. The lender then secures the loan with a mortgage over the chattel. Legal ownership of the chattel is transferred to the purchaser at the time of purchase, and the mortgage is removed once the loan has been repaid. Chattel mortgages may have more particular characteristics in different jurisdictions.


What particular laws in Canada cover the issuance of a Chattel Mortgage?


Canada has several regional laws that are supposed to deal with issues regarding the registration of chatter mortgage. However, these laws are not the same in two different provinces. Even applications of the regulations will not be the same in the law of jurisdictions belonging to two different provinces.
Ontario and Manitoba provinces control and administer the whole process of acceptance of security for Chattel Mortgages, through the Personal Property Security Act. It gives maximum priority in the listing of mortgages to satisfy the security concerns of both, the borrower and the lender.

What are the Benefits of Chattel Mortgage?


Several benefits come with Chattel mortgages such as fixed interest rates and flexible payment periods. The time period of repayment may vary from 2 years to 5 years. The salvage value of the security can also be taken into account by calculating its depreciation value. This can affect the loan agreement in terms of monthly repayments which can be made to depend on the budget of the borrower.
Additional advantages include a constant interest fee, set payment each month, the knowledge of expenses and the option of making deposits in cash or exchange. An important aspect of Chattel Mortgages is the provision for tax rebates when the vehicle used as a security for the loan is used for business or official purposes. Borrowers, who list for Goods or Service Tax in Canada for the item purchased, can receive the GST which is inclusive in the vehicle price in their business transaction declaration. They are also exempted from paying GST for the repayments they make each month.
Wikipedia defines GST as a multi-level value added tax introduced in Canada on January 1, 1991, by then Prime Minister Brian Mulroney and his finance minister Michael Wilson. The GST replaced a hidden 13.5% Manufacturers' Sales Tax (MST); Mulroney claimed the GST was implemented because the MST was hindering the manufacturing sector's ability to export competitively. The introduction of the GST was very controversial. The GST rate is 5%, effective January 1, 2008. The Goods and Services Tax is defined in law at Part IX of the Excise Tax Act. GST is levied on supplies of goods or services purchased in Canada and include most products, except certain politically sensitive essentials such as groceries, residential rent, and medical services, and services such as financial services. Businesses that purchase goods and services that are consumed, used or supplied in the course of their "commercial activities" can claim "input tax credits" subject to prescribed documentation requirements (i.e., when they remit to the Canada Revenue Agency the GST they have collected in any given period of time, they are allowed to deduct the amount of GST they paid during that period). This avoids "cascading" (i.e., the application of the GST on the same good or service several times as it passes from business to business on its way to the final consumer). In this way, the tax is essentially borne by the final consumer.

Understanding the Complexity of Chattel Mortgage


In simple terms, a Chattel Mortgage can be obtained by anyone by pledging any personal moveable property. Some of these properties include vehicles such as cars, boats, aircrafts and trailers, or appliances, electronic goods and gadgets. When these items are removed, they will not cause any change or damage to a freehold real estate property like a building or land, which is owned by the borrower.

References


wikipedia.org
wikipedia.org


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