What is a Preferred Mortgage? A Comprehensive Legal Overview

Definition & Meaning

A preferred mortgage is a specific type of mortgage related to vessels, as defined under 46 U.S.C.S. § 31322. It is characterized by three main components: it must encompass the entire vessel, be filed in substantial compliance with 46 U.S.C.S. § 31321, and cover a documented vessel. The term "vessel" includes not only the ship itself but also its apparel and appurtenances, which are essential for its operation and use.

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Real-world examples

Here are a couple of examples of abatement:

Example 1: A boat owner secures a preferred mortgage to finance the purchase of a yacht. The mortgage covers the yacht and its necessary equipment, such as sails and navigation systems.

Example 2: A shipping company takes out a preferred mortgage on a cargo ship to obtain funds for upgrades and repairs, ensuring the mortgage includes all necessary appurtenances for operation. (hypothetical example)

Comparison with related terms

Term Definition Key Differences
Preferred Mortgage A mortgage that covers the entire vessel and is filed under specific legal requirements. Includes apparel and appurtenances, and is specifically for documented vessels.
Regular Mortgage A loan secured by real property, which can include various types of assets. Not limited to vessels and does not have specific maritime requirements.

What to do if this term applies to you

If you are considering a preferred mortgage, it is advisable to consult with a legal professional to ensure compliance with all requirements. You can also explore US Legal Forms for ready-to-use templates that can simplify the process of drafting and filing your mortgage documents.

Quick facts

  • Typical fees: Varies based on the lender and vessel value.
  • Jurisdiction: Governed by federal maritime law.
  • Possible penalties: Foreclosure on the vessel if mortgage terms are not met.

Key takeaways

Frequently asked questions

A preferred mortgage is a type of mortgage that covers a documented vessel and includes its apparel and appurtenances.

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