Join Date: May 2012
Location: North Vancouver, BC
Thanked 29 Times in 27 Posts
Rep Power: 5
Re: Boat loan vs. refi or home equity
Obviously it depends on your financial circumstances, but in general whatever you can do to keep the cost of borrowing to a minimum is a good thing. A boat loan, I assume is going to be prime plus 2 or 3%, and amortized over 6 or 7 years at most? If you can swing the high payments, you will be paid off quickly, but still you pay a lot of interest. If you have plenty of equity in your house that you can secure the loan with, you will get a much lower interest rate, and probably more flexibility on the term of the loan. You could even use a secured line of credit that would give you full flexibility on payments, term and everything. The only thing you would HAVE to do is pay the interest each month. Of course you would have to be very disciplined about paying it off in a set amount of time so you don't drag it out too long and pay a fortune in interest. Refinancing your home, and rolling a boat into your mortgage? I guess that's one way to get a pretty nice boat with a relatively small payment, but you are amortizing a depreciating asset over a very long period of time. I guess you could also look at it as cashing in some of the value of the house. Don't forget, rates are low now, but if you are still paying for your boat 10 or 15 years down the road rates could be a lot higher, and the boat worth a LOT less! If you can't afford to pay it off in a reasonably short period of time, you probably can't afford it!
I would be very cautious about "spending" the equity in your house unless your mortgage is a very low percentage of the value of the house, and there is minimal chance of the market collapsing in your area. A lot of people lost their houses in the States. It would be pretty silly if you lost your house because you bought a big expensive toy!
I have been tempted to borrow big money for a much newer, bigger boat, but I keep thinking about the payments I would have to make. I would have to keep shelling out that cash even when the boat sits unused through the winter, and while I am at work, etc. Most likely we will get the mortgage paid off, and then put those payments towards a boat that will be paid off just in time for retirement, when we will really be able to enjoy a big new boat!
1979 Santana 30 Tall Rig
Last edited by SchockT; 04-12-2013 at 03:12 AM.