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Looking to buy a manufactured home, a boat, or a piece of equipment for your business? You may need a chattel mortgage.

Chattel mortgages are used to finance movable assets separately from the land they occupy. They come with a higher cost than a traditional mortgage, so manufactured home dwellers who qualify for a standard mortgage will save money by choosing that route.

Here’s what you need to know about how chattel loans work and when you might want to look for alternative financing.

What Is a Chattel Mortgage?

First of all, a chattel mortgage is used for personal property, not real property. Real property includes land and property that cannot be easily removed from the land.

When a chattel mortgage is used for a large, movable asset like a manufactured home — called a mobile home before June 15, 1976 — or a piece of equipment (the “chattel”), the asset is held as collateral on the loan. If the borrower defaults on the loan, the lender can recoup costs by selling the asset.

A chattel loan may have a lower interest rate than an unsecured personal loan but a higher rate than a traditional mortgage.

Note: SoFi does not offer chattel mortgages at this time. However, SoFi does offer conventional loan options.

How Does a Chattel Mortgage Work?

Chattel mortgages are used in two main instances: when an asset can be moved or when the land the asset sits on, or will, is leased. (In fewer cases, a chattel loan may be used when a borrower doesn’t want to encumber their owned land with a loan, as when land is owned jointly in a trust.)

Applying for a chattel loan is similar to applying for other types of loans, such as home equity loans and personal loans. The lender will look at your creditworthiness and ability to repay the loan before making a decision.

Chattel loans are typically small, with relatively short terms, but usually require no appraisal, title policy, survey, or doc stamps (the documentary stamp triggers a tax in certain states).

Recommended: First-Time Homebuyer Guide

What Are Chattel Loans Used For?

Here are some of the most common applications for chattel loans.

Manufactured Homes

Manufactured homes are built in a factory on a permanent chassis and can be transported in one or more sections. Formerly known as mobile homes, they’re designed to be used with or without a permanent foundation, but must be elevated and secured to resist flooding, floatation, collapse, or lateral movement.

Many are titled as personal property. Manufactured housing that is titled as personal property or chattel is only eligible for chattel financing.

When a manufactured home is titled as chattel, you’re also going to pay vehicle taxes to the Department of Motor Vehicles instead of property taxes.

Many consumers may encounter a chattel loan at the sales office of a manufactured home builder. They’re convenient with quick closing times, but come with a higher interest rate and a shorter term than most traditional mortgages.

This makes the financing cost of the manufactured home high, even if the payment is low thanks to the lower cost of a manufactured home compared with a site-built home. Around 42% of loans for manufactured homes are chattel loans, according to the Consumer Finance Protection Bureau.

When you own a manufactured home and rent the land it occupies, such as in a mobile home park, you will need a chattel mortgage, except when an FHA Title I loan is used.

Tiny Houses

A chattel mortgage may be used for tiny house financing when the tiny house is not affixed to a permanent foundation and/or when the land is leased.

Tiny houses are usually too small to meet building codes for a residential home, so even if the home is on a foundation and on owned land, a traditional mortgage is almost always out of the question. Even if Fannie Mae or FHA allows the property, the lender won’t.

Tiny houses on foundations are usually classified as accessory dwelling units.

Vehicles

A chattel loan may finance assets that are not permanently affixed to the property, such as vehicles. Dump trucks and construction vehicles may qualify.

Equipment

A chattel loan can be used to purchase large equipment for a business, such as a forklift or a tractor. Even livestock can be purchased with a chattel loan.

How Much Does a Chattel Mortgage Cost?

Chattel mortgages are more expensive than many other different mortgage types. The Urban Institute concluded that chattel loans were substantially more expensive than non-chattel loans. Owners of manufactured homes would spend thousands more per year in interest compared with a traditional mortgage.

These types of mortgages are not being purchased by Fannie Mae or Freddie Mac on the secondary mortgage market. When a conventional mortgage is purchased by one of these entities, the loan originator obtains more liquidity and can provide more loans to more people. This drives the cost of the mortgage down.

A chattel mortgage, on the other hand, must stay on the books of the lender, making the loan riskier and more expensive.
If you qualify, you might want to consider refinancing your chattel mortgage into a traditional mortgage.

Recommended: Home Loan Help Center

Chattel Mortgage vs Traditional Mortgage

To qualify for a conventional or government-backed mortgage instead of a chattel mortgage, you must own the land your home sits on, the home must be permanently affixed to a foundation, and it must have at least 400 square feet of living space (600 for Fannie Mae’s conventional loan for manufactured homes).

Mobile homes built before June 15, 1976, will not qualify for a mortgage loan. A personal loan is about the only option.

You must also meet all other requirements set forth by the lender to qualify for a traditional mortgage. A mortgage calculator tool can help with this.

For some types of assets, a chattel mortgage may be a good option to consider. Take a look at the major differences.

Pros and Cons of a Chattel Mortgage

A chattel mortgage is more expensive than a traditional mortgage, so anyone who can qualify for a traditional mortgage may wish to pursue that option first. It’s not all bad news for chattel mortgages, though, especially for other types of property where a chattel loan is desirable.

Consumer Protection and Chattel Mortgages

Chattel mortgages on manufactured homes are a special concern to the Consumer Financial Protection Bureau because that type of housing:

•   Serves an important role in low-income housing

•   Is typically taken on by financially vulnerable people

•   Has fewer consumer protections

Manufactured home sellers often have an on-site lender where borrowers can walk away with a chattel loan the same day as the home purchase. In certain scenarios, though, better financing options might be available.

The Takeaway

Buying a manufactured home or a piece of heavy equipment? A chattel loan could be the answer. If, though, you are buying a manufactured home and own the land, a traditional mortgage makes more sense than a chattel mortgage.

FAQ

Where can I get a chattel loan?

Lenders specializing in chattel or manufactured housing loans will offer this type of loan.

How much does a chattel mortgage cost?

The interest rate of a chattel mortgage could be several percentage points higher than that of a standard mortgage loan.

What happens at the end of a chattel mortgage?

When a chattel mortgage is paid off, the borrower receives legal title to the property or asset borrowed against. It’s also possible for landowners with permanently affixed manufactured homes to refinance into a traditional mortgage to end their chattel loans.

Is a chattel mortgage tax deductible?

A chattel mortgage qualifies for the same tax deductions that a traditional mortgage does. This includes a deduction on mortgage interest paid throughout the tax year.

Photo credit: iStock/MicroStockHub

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SOHL-Q324-037

If you’ve ever spent a lazy Sunday wandering through the mall, not in need of anything in particular, only to emerge with a couple of bags of purchases, you are not alone. Many of us shop as entertainment and wind up having less cash or more credit card debt as a result.

Shopping in-person can be a fun distraction thanks to the music pumping and the eye-catching displays. It’s easy to be transported and suddenly feel that you need that new jacket, cell phone, or even sofa. And today, shopping online or on your phone can be equally appealing, as a parade of products and coupons pass before your eyes.

But overspending isn’t good for anyone’s budget or debt ratio. Here, you’ll learn 11 tips to stop shopping out of boredom and protect your hard-earned cash.

What Is Boredom Spending?

Boredom spending, or shopping to fill free time, happens for many reasons. It often occurs when you’re feeling unstimulated or there’s a lack of anything demanding your attention. You might find you’re prone to boredom shopping when you’re procrastinating about work. Going out and buying something can make you feel as if you’ve accomplished something with your time. Or perhaps you do it when you want to escape certain negative emotions such as anxiety, depression, or loneliness.

Some people turn to boredom shopping because it’s easy to do. Technology has allowed us to mindlessly scroll social media, install apps, and instantly link to retailer websites without having to leave the couch. And if you’ve already stored your payment information online, it’s even more convenient to buy on a whim.

Shopping while bored can be harmless if it’s small-scale and infrequent. But if it’s a habit or your go-to activity the minute you’re freed up, shelling out money on unnecessary purchases can bring on extra debt and bust your budget.

💡 Quick Tip: Want to save more, spend smarter? Let your bank manage the basics. It’s surprisingly easy, and secure, when you open an online bank account.

Examples of Boredom Spending

The habit of buying when you’re bored can happen anywhere and anytime. For instance, it can occur when you need to kill time before an appointment and wander into a store to browse and then you wind up purchasing a couple of things because a “buy one, get one” sale was advertised. Or you might suddenly have a free afternoon because a friend canceled plans, so you check Instagram where you see engaging ads for exercise equipment you never knew you needed.

Life offers up many opportunities for boredom shopping. As long as you find yourself with gaps in your schedule, there’s time to potentially give in to impulse buys. And this impulsive buying can lead to overspending and more credit card debt which, thanks to its high interest rates, can be a challenge to pay off.

11 Tips to Avoid Boredom Spending

If you need some strategies on how to quit spending money when bored, here are tactics to try. They take a variety of angles to keep you from overspending during your downtime.

1. Reducing Time Spent on Social Media

Changing your spending habits to combat boredom buying likely requires stepping away from your laptop, tablet, or smartphone. Social media can contribute to “fear of missing out” (or FOMO) spending. Trying to keep up with others’ buying habits so you’re not left out can affect mental health, causing stress, unhappiness, and feelings of low self-esteem. People dealing with FOMO may go into debt because of overspending.

To resist temptation and cut down on social media use, consider deleting specific apps or turning off the app’s notifications. There are also apps designed to increase focus and productivity that might be helpful. Freedom and StayFree are two examples; they can block social media and other websites for specific periods of time.

2. Starting a Side Hustle or a Second Job

There are several benefits of having a side hustle, freelance gig, or part-time job. For one, it can fill any additional time you might have for boredom spending. Actively pursuing another stream of income can also ignite a passion for something new, increase your professional skills and introduce you to new people.

In addition, having a side gig provides more money to put towards paying bills, decreasing debt, and increasing your savings account.

3. Allowing Splurges in Your Monthly Budget

Expecting yourself to never make boredom purchases may be unrealistic for many people. In that case, you might come up with a specific dollar amount to automatically slot into your weekly or monthly budget rather than quit cold turkey. Making an allowance for this type of shopping spree can help keep you from going completely overboard and having to skimp elsewhere.

Recommended: Developing Good Financial Habits

4. Taking a Break

Unpacking what’s going on when you are feeling as if life is tedious can help stop shopping when bored.

Feeling bored may signal it’s time to relax, switch gears, or engage in some physical activity. That “high” you tend to feel after buying something? You can thank the release of dopamine, a feel-good brain chemical that is part of the brain’s reward system. Dopamine is also released when you’re exercising or doing something you enjoy.

You can experience a dopamine rush by partaking in non-shopping activities, such as going for a hike or brisk walk, gardening, listening to music, and meditating. Relaxing with a book, tackling a jigsaw puzzle, cleaning, or baking your favorite sweet are also ways to reap similar emotional rewards while breaking monotony.

5. Setting Financial Goals

Dig into how boredom buying is impacting your financial health. When you see how it’s making it hard to achieve your aspirations, you’ll have added incentive to stop this behavior.

Creating money goals for yourself is an important step towards gaining control over your finances. It’s also an ideal way to start developing good financial habits. Start by writing down your short-term and long-term goals which could include tracking weekly spending, starting an emergency fund, or saving up for a down payment on a house. Once you’ve got it down on paper or in a spreadsheet, prioritize your objectives, give yourself a reasonable time span to meet those goals, and make a commitment to stick to them. Take note of how unplanned splurges will interfere with your budget.

6. Rewarding Yourself When You Achieve Your Financial Goals

If you’ve avoided boredom shopping for a couple of months, paid off a credit card bill, or managed to stow money in your savings account, it’s okay to treat yourself to a low-cost item such as a favorite meal or a movie. These little rewards can keep you from feeling deprived and inspire you to stay on course.

There are lots of rewards that don’t cost anything, such as a nature walk or a hot bath. But if you do want to spend, be sure to set a price limit based on what you can actually afford. The goal here is to reward good behavior and encourage you to stay on target and not let boredom purchases rock the boat.

7. Utilizing the 30-Day Spending Rule

The 30-day spending rule is a strategy to help reign in impulsive spending. Basically, the rule is simple — if you see a nonessential item either online or in a store, do not buy it. Instead, make a note in your calendar for 30 days later with details about where you saw the item and its price. When you reach that date, if you still want to purchase the item, and can afford it, you can do so, knowing it’s no longer an impulse buy. Instead, the purchase constitutes a well-considered financial choice.

There’s a good chance, however, the urge to make that purchase will have faded and you simply move on.

8. Unsubscribing from Email Lists

Retailer emails or newsletters touting sales, discounts, and deals can clutter your inbox and awaken the boredom spending monster. You can remove these temptations by unsubscribing from the company mailing lists.

Usually when you open their email, there’s an “unsubscribe” button at the bottom of the correspondence. It may be in small print but if you click or tap it, you should be able to opt out of emails. Take note it will probably take a few weeks for communications to stop.

You can also opt out of text messages that broadcast sales and special deals to your mobile phone. This can help minimize the temptation to shop when bored.

9. Learning New Skills That Interest You

What sparks your interest? Maybe you want to learn web design, become a real estate professional, or hone your cooking skills. Expanding your abilities in an area of interest can keep boredom at bay, whether you choose to study in person or online. Acquiring new skills could also make you more marketable and increase your income.

But even if learning something new doesn’t impact your earning power, it can still enrich your life. Getting involved in anything that stimulates your brain — whether it’s learning a new language, taking up knitting, or signing up for that novel writing class — can help you feel more fulfilled and increase your self-esteem.

10. Making Shopping Harder

As mentioned above, shopping can be super easy, increasing the odds that you might do some boredom buying. Why not fight back with tricks and tools that help you cut back on spending? The first thing you can do to reduce online and in-app shopping is delete your credit card or payment information from your favorite sites and your phone. This will add a few steps to the checkout process which may reduce the likelihood of spontaneous buying. It will give you time to be mindful about your spending and reconsider.

If you’re out and about, try leaving your credit cards at home to avoid boredom-driven buying.

11. Connecting With Others

Shopping can be a way of coping with being alone, and studies have shown loneliness leads to higher levels of boredom. Interacting with other people is key to cutting down on social isolation. Make plans to see friends and loved ones you enjoy. Volunteering for a local organization, political campaign, or charity is another great way to network. You’ll meet like-minded people and hopefully stay away from stores.

Saving Money With SoFi

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

How do I train myself to stop spending money?

The first thing you’ll want to do is stop and ask, “Do I need this or just want it?” If the answer is want, try waiting 30 days and then deciding whether to make the purchase. Also helpful: Find other, non-shopping ways to use those times you feel bored, such as meeting friends, starting a side hustle, or pursuing a hobby. Put the money you save towards a goal like paying down credit card debt, and congratulate yourself for your hard work.

What can I do instead of spending money?

Life presents many other options and healthier ways you can deal with ennui besides spending money. When you’re bored, engaging in another activity such as reading, cleaning, or decluttering can take your attention away, allowing you to feel productive and have a sense of purpose. Spending time with loved ones is another good use of time. Most likely, when you become engrossed in something else besides shopping, the impulse to buy will subside.

What are some spending triggers?

Shopping can stem from both psychological reasons and outside factors. Some people may be triggered to shop because of fear of missing out on what others have; others may need a mood lift when feeling sad, anxious, or lonely. Retailers are also known to use specific sensory stimuli both online and in stores to inspire spending.

Photo credit: iStock/Vadym Pastukh

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