Boat Loans

[zaldog]

Thanks for all the input. I have paid cash for all my other boats however the next one is going to be my BIG boat. I could just buy a 50k boat for cash but why? I want a boat I can live on and then be able to go cruising off into the sunset. So my idea is to buy the boat that can do that now and not have to sell the 50k boat to buy the 100k boat 5 years from now. But as stated by Jeff and others it will help to have good assets like a house and be in a higher income bracket. (My real budget is around 130k at this point)

The original plan was to sell the house use profit from the sale keep savings account up and buy the sail off into the sunset boat. But this may not be the best plan, if I want to finance part of the boat.

As when we do this my wife will be working most of the time :-) and we will have less income initially. If I sell the house move to the west coast try to buy a boat with wife only working we will not look very good on paper.

Modified plan, buy the boat while we are both working and in the higher income bracket sell the house after we buy the boat hehe (don't tell the lender). Store the boat on the hard for 6 months or so to avoid paying slip fees . Sell the house bank the cash commission the boat get a slip and move. Am I CRAZY!!!!!!

Believe me I would rather pay cash but why, if I can keep it in the bank for other stuff and interest. Then when ready pay the boat off early as long as i get the loan with out pre payment penalties.

Also whats this they make restrictions on where you can take the boat? How do they know where the boat is after you close the loan? Do they have a keel bracelet on the boat and if it goes to far off shore the marine lender police come looking for you:-)

Ultimately my real return on investment will be FREEDOM!!

[sailh34]

We used Suntrust marine when we got our boat. That was a couple of years ago and the boat would have been 18 years old. Their rate actually beat most of the marine specialty places and they were really good to deal with. It was kind of funny - they offered the same rate for a 5, 10, 15, or 20 year loan (5.75% at the time). In addition, the interest is normally deductible if treated as a second home. The max they would loan was 85% of the boats value.

[ImASonOfaSailor]

I dont see any problem with getting a boat loan as long as you can afford it. to me it is like having a house loan, people buy $200,000 dollar homes why cant you buy a boat its all the same. As long as you can afford it.

[Sailormann]

A mortgage is a loan that is secured by the property bought using the loan.

Usually referred to as a chattel mortgage - so named because the security for the mortgage is a chattel - in this case the boat.

If you have a stellar credit rating it should not be a problem to get one, if you are planning on putting as large a percentage down as you indicate.

Me, I fall into the category of "never borrow money for something that won't appreciate" (but that's just my philosophy and I'm not sure if it's necessarily a better approach than others have), but take a long hard look at the amount of interest that you'll be paying...

[camaraderie]

House loans make sense generally because:
1. You get a tax write off
2. They appreciate (over time).
Taking a loan on a boat to go cruising on generally does not make sense because:
1. The tax write off is meaningless if you have no income.
2. Boats decline in value
3. The interest rates WELL exceed what you can get by leaving your $$ in the bank so it is better to take it out and pay for the boat.

The above analysis is logical and applies only to going cruising on a boat.
Going cruising is not logical so disregard the above! (g)

[sab30]

As a quick suggestions as a wealth manager you could also look at the following scenario.

If you can get the 2nd mortgage around 5% on your boat and your investments are averaging 7-8% then why would you cash in your investments to pay off a 3% spread..likewise you could invest your cash and use the 3% spread to offset the depreciation. If you are at the mercy of a bank loan at 7% then you are not in a very good situation but in Canada there are some other options...shhhhh Revenue Canada may read this.

[Bardo]

I like the 2nd mortgage option, as long as the spread on the rate is in favor for the cash in the bank. Another factor, and I hate to even bring it up, but God forbid you lose the boat in a disaster of some sort, the risk is carried by the lender and your not out the cash. This assumes that insurance will return a depreciated value on the boat etc etc. Let Other People's Money work for you! Oh yeah, you still get to enjoy the sunset!

[sab30]

Great point Bardo! You can even shelter your investments so that they are creditor proof..just in case the insurance company doesnt pay and the bank comes after you..not the best but better than them taking your life savings. If you have any income look at starting a "business shell" for your boat and you can offset the depreciation against your income as well as all other expenses..that also allows us here in Canada to recoup the GST (federal tax) on new and imported boats. Lots of legitimate options to save money.

[hellosailor]

"April 03, 2006 in Marine Mortgages | Permalink
Marine Mortgage Definition
"Marine mortgage" means a mortgage which is registered in accordance with the Merchant Shipping Act 1993 and by virtue of which a boat (but not any share thereof) is made a security for a loan.

So a marine mortgage is secured on the boat that it has financed, in a similar way that a house is."

From a UK web site. Apparently "marine mortgage" is a Britishism, or a UK concept, not a term we'd use in the US. From the IRS's point of view, a "home" is a "home" regardless of whether it is a boat or a cabin. From the lender's point of view...Are there any US-based lenders that offer "marine mortgages" as opposed to boat loans? How do they define it differently?

[zaldog]

In terms of protecting assets and maybe a tax write off. Would something like this work? Incorporating a technology consulting firm of some sort (home theaters for boats)? Patent pending :-) The boat being the primary office and storage facility. Oh yea and custom video sunsets for the land lubbers.