Financing: interest and duration

[Guitarpah]

To all those who finance their blue water cruisers, what kinda terms do you get? Specifically (an hopefully without getting to personal) what is the duration of your finance agreement and what kind of interest rate do you get? Forgive me if this is a stupid question for any reason... I am new.

[Cruisingdad]

In general, you can finance a boat with a note (that is the final note) over 100k for 20 yrs. Terms will be 1-2% higher than a house, in general. It requires 20% down. It also requires outstanding credit - much, much tighter and more personal than a house. Under 100k note, 10-15 years.

Also, they will look at LTV ratios of no higher than 35-40 percent (ballpark, with 40% being with perfect credit) WITH the boat loan. Many also include reasonable expenses (like slip if you are in high rent districts). They will also want ballpark 12 months of living expenses in the bank with all the new expenses. They really like to loan to people with houses and long employment history's.

- CD

PS IF you mention to them that you are considering living aboard, they will hang up on you. Don't do it!!

PSS Most people who get loans on boats probably do not need to get loans. I doubt the standards have gotten any easier with credit tightening up.

[Guitarpah]

I see, so it's a standard loan and not more similar to a mortgage. I should really consider lending laws in the state of origination then, because the protections allocated to home owners often don't apply to other loans.

20 years seems like a long time for a depreciating asset, but that explains why there are so many relatively new boats in good condition on the market; sell before significant depreciation so one may pay off the loan and roll over the equity into a new boat.

[xort]

Trident funding did not hang up on me when I discussed livaboard. They did say they have different sources for different situations.
I borrowed about 80% of the purchase price on a 23 year old boat.
Survey is critical, it must not have any major deficiencies.
Terms were stated as CD says; over $100,000 20 years; under that, 15 years.
This was this May and things might have changed since then.

[Bene505]

I know a guy who bought a repossessed boat and got 4.99% from the lender. I think it was Bank of America. 10% down, 20 year loan.

Having that financing -- plus discounted repo pricing -- made the boat very attractive versus other boats.

[Cruisingdad]

Originally Posted by Guitarpah

I see, so it's a standard loan and not more similar to a mortgage. I should really consider lending laws in the state of origination then, because the protections allocated to home owners often don't apply to other loans.

20 years seems like a long time for a depreciating asset, but that explains why there are so many relatively new boats in good condition on the market; sell before significant depreciation so one may pay off the loan and roll over the equity into a new boat.

No, it is very similar to a house mortgage and amortized, but more stringent.

[SailKing1]

There are a number of factors that a lender looks at in determining what they will loan, for how long and at what rate. It all comes down to risk. Yes there is a standard, but it fluctuates from lender to lender.

LTV ratio as CD mentioned can range from 40% to 85%. LTV ratio is what a lender determines the ACV (actual cash value) is based on market and resale history. The ACV is what it would go for at auction. This should give you some idea as to the REAL value of your purchase. This might also change from lender to lender but not usually by more than a few % points. Some brokers all also good at creating a higher value based on additions to the boat in question when they spec the boat out for the lender.

Different lenders have different tears based on ones credit worthiness. This can depend on a number of influences effecting different lenders and changes quarterly, so it pays to shop for a loan.

As xort said with trident they did not hang up on him when he mentioned "live-aboard", but trident is a lender source that secures the loan and gets a percentage of basis points for their efforts. In other words based on their lender bank they will shop the loan for you for a fee. Can be an easy pain free approach. Kind of like going through the F&I dept. at a car dealership.

Then there is the fact that one lender may turn you down or offer unappealing rates based on money availability. (theres not yours)

And of course there is your risk factor based on previous credit and employment history. The key is to get all your ducks in a row and shop for the best deal, or pay someone like trident to do it for you.

[sander06]

I reckon that if you can't afford to pay cash, you can't afford it. That's just me, however.

[SailNation]

Can you deduct the interest paid on your taxes like you can a second home?

[sailingdog]

IIRC, you can, provided the boat has a full permanent galley and head installation. No camping stoves and no porta-potties.

Originally Posted by SailNation

Can you deduct the interest paid on your taxes like you can a second home?