Boat Loans

[zaldog]

How are boat loans written? Let's say I want to buy a 1981 Panda 40 in bristol condition and a great survey. Cost of the boat is 100k how many years will the bank let you finance for if you put 50% down and carry 50k. Can you get a mortgage for 15-20 years or is it more like buying a car with only up to 5 years what about sales tax?

[Bump]

My experience is that most banks etc don't like to loan money on an older boat. My bank indicated that they do not finance anything over 7 years old. Most folks I know take a second on the house and finance that way. And yeah you have to pay the sales tax in most states.

[sailingdog]

If you document the boat, you can often qualify for a marine mortgage, which is very different from a personal loan. The interest rates are usually better and the terms are usually longer. However, getting a marine mortgage on an 26 year old boat for that much may be a problem.

You need to call a few companies about getting financing... Essex Credit and BoatUS both have marine mortgages IIRC.

[zaldog]

Thanks SD does it make a difference good or bad if you will be using the boat as a primary residence? In other words do they frown upon financing a boat that will be used as a live aboard?

[TrueBlue]

If I may add a caveat to the idea of this being a "primary" or sole residence; having an asset to attach in case of defaulted loan payments, such as real estate, makes the prospect of getting a loan approved much more realistic - especially on a depreciating asset such as a boat.

[sailingdog]

I think getting a loan would be more difficult if the boat is your primary residence.... banks like to know where they can get their hands on the people they lend money to. Being on a boat means you might not be where they think you should be..

[uspirate]

Originally Posted by sailingdog

Being on a boat means you might not be where they think you should be..

Ahhhh, boating life is great

[Maine Sail]

With boats and cars is if you can't afford to pay cash then don't buy it. Houses at least appreciate in value over the long run while 90% boats and cars (except for some very collectible cars and boats) depreciate. Why would you want to pay 8% interest on a declining investment?? If you have 50K buy a 50K boat or save up till you can afford the boat you want. Personally I don't think boat loans are a wise investment unless you invest your 50K and can make the returns on that (highly unlikely) to pay the boat loan so you still have your principal...

[Jeff_H]

First one quick minor correction, mortgages are on real property. Boats are not real property so you get a boat loan and not a boat mortgage. In most states it does not matter whether the boat is your primary residence or not since homestead provisions only apply where the primary residence is real property.

Banks generally are not a great place to get a boat loan. They tend to have higher rates, only make loan on newer boats with shorter terms. Marine loan companies generally work out better all around. Your loan will include restrictions such as requiring that the boat be documented and may restrict where you can take the boat. Marine loan companies will make loans on older boats after survey. They loan some percentage of the lower of the value of the boat or the purchase price, but that percentage (usually 80%) varies from company to company.

I borrowed against a 19 year old boat and opted for 10 years to pay it off (I think that I could have gotten 15 years). I got a lower rate by borrowing less than 60% of the boat's value/purchase price for a shorter period. The company that I dealt with did not include tax, registration, documentation fees and services, transporting the boat from Maine, or commissioning in the price of the boat. They did include some percentage of improvements made to the boat it the first 30 days after purchase.

Essex and Trident are two lenders that have good reputations. I have dealt with Trident and had a very good experience with them. The provided very good service and even negotiated a lower rate than the original rate with no fees when the rates dropped a couple years into the loan. You do need to make sure that there are no prepayment penalties. Unlike home loans marine loans sometimes have a pre-payment penalty clause and these can come back to haunt you when you pay off early as I did. The lack of a penalty clause was one reason that I went with Trident.

Marine loans typically require a survey, a certain level of insurance, and documentation.

I also want to talk about Halekai's point, boat loans do make sense if you are in higher income brackets, can use the boat as a primary residence or second home, and can earn money on your money. In my case, at the time my boat loan was a slightly lower rate than my house mortgage. With the tax deduction for a second home, I was paying something around 3 1/2% interest. I was able to obtain a much higher return on my invested money at the time. Cars are a different story since the interest is not deductable. Also, I have generally broken even or come out ahead on the boats that I have owned, if you don't factor in my maintenance costs which are easy offset by the benefits of not spending money on other forms of entertainment when the boat is use.

Jeff

[sailingdog]

Jeff-

A mortgage is a loan that is secured by the property bought using the loan. A marine mortgage is secured by a lien against the boat. A home mortgage is secured by a lien against the home. There is nothing in the definition of a mortgage that requires it to be real property. As a secured loan, they tend to have better interest rates than personal loans, which are not secured.

mortgage
noun 1. a conditional conveyance of property as security for the repayment of a loan
verb 1. put up as security or collateral
WordNet® 3.0, © 2006 by Princeton University.