how about refrigerators, home boilers, computers, expensive power tools and various other goodies that, for a small business, might quickly add up? I also note that for many such expensive purchases the resale value (which presumably is important in case of default) would actually decline much less, if at all, at the moment of first sale than that of a car.
Or is the financing terms for cars actually not a “mortgage” either? What’s the scoop on “mortgage” and other contracts involving financing purchases with borrowed money?
Mortgages appertain to real property. The general purpose term when personal property (that is, everything else) is at issue is “secured loan.”
Many transactions are secured. In addition to consumer purchases of homes* and cars, they are used for large appliances, boats, and anything else where the seller retains a security interest in the chattel.
They are quite often used by retailers. Floorplan financing occurs where the lender furnishes the retailer a revolving line of credit. Inventory purchased with these advanced funds secure the loan (often paid to the manufacturer directly by lender on behalf of the retailer). As the retailer sells product, a remittance is made to the lender, who then replenishes the line of credit, allowing the retailer to restock its own inventory. This is frequently used by car dealers, for instance.
Your state maintains a database of UCC-1 financing agreements, the filing of which is require by the UCC to perfect a security interest. Typically, the office in charge of this is your state’s secretary of state. This database is publicly searchable–since the point is to allow potential lenders to learn about senior encumbrances on assets that the intend to have pledged to them. Reviewing it would reveal a whole host of chattels that underlie various loans in your state.
You can certainly consider a mortgage as a kind of secured loan. However, Article 9 of the UCC, which governs secured transactions, controls only personal property security interests.
Traditionally, a mortgage is a transfer of legal title to the lender, where the borrower has the right to recover title by paying off the loan. It’s typically used for real estate and rarely (if ever) for cars. Rather, as Kimmy Gibbler says, for cars and other types of personal property, what the lender receives is a security interest, which includes the right to sell title in the event of default.
These days, the distinction is technical, not very important and has to do only with who has legal title. Whether we’re talking about a mortgage or a security interest, the lender has to jump through various hoops, specified by law and varying widely by jurisdiction, to convert the collateral into a recovery on the loan.
Mortgage versus Secured Loan: you can deduct the interest on a mortgage from your income in the USA when tax time comes.
So, if you buy a 100,000 dollar boat, and take out a 15 year mortgage, you can deduct the interest (which is a substantial am’t of money) along with closing costs.
Yes, but that’s because the mortgage is secured by a piece of real estate. i.e., your home, and not by the boat. If you borrowed $100,000 for a boat, and used anything else as security, you would not get that income tax benefit.
However, the mortgage vs secured loan issue is irrelevant for tax purposes. The deduction is for interest paid on the acquisition, improvement or construction of a personal residence*. A residence is virtually anything with sleeping, eating and toilet facilities. Boats, RVs and fifth wheels can all qualify regardless of the terminology used on the loan.
And yes, that means a refi used to pay off credit cards is NOT tax deductible. I wouldn’t be surprised if the mortgage interest deduction is the most commonly abused item in the tax code, but it’s very hard for the IRS to audit and it certainly isn’t the highest dollar value abuse.