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Old 09-03-2009, 18:00   #16
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I am in Florida, but the issue of high risk due to being in Florida has not been mentioned as an issue. I don't plan on being in Florida during huricane season, as I expect insurance to remain would be prohibitively expensive. The idea has always been to sail north in the spring and south in the fall.
Understood, But I can't help but think it's a consideration in a lenders mind.

For instance, when you sail north during 'cane season, will you still work? If so, where will you live? Will you have to return to Florida to rent and pay slip fee's up North? You see where I'm going? I must be missing something?
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Old 09-03-2009, 18:10   #17
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I filled out an online application for a boat loan 8 years ago. A finance amount came back from KeyBank. Then I went shopping for the boat. A transfer agent from Maryland was then secured. Once the boat was cleared by the feds for documentation and a surveyor's survey was sent to the documentation clearing house, the yacht broker had to verify that adequate funds were on deposit to him the money from the bsank was released to the broker. How complex. The bottom line is to try to get financing on line. I was scared but I could not believe the result.
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Old 09-03-2009, 19:28   #18
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If you don't mind me asking, who is/was your lender?
Key Bank via a local branch office in Maine - not through the national website which only dealt with new(ish) boats. We ended up paying it off to save on insurance. I forget what the requirements were, but there was something funky that made insurance difficult and expensive.
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Old 09-03-2009, 19:47   #19
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For instance, when you sail north during 'cane season, will you still work? If so, where will you live? Will you have to return to Florida to rent and pay slip fee's up North? You see where I'm going? I must be missing something?
I plan on living aboard and continuing to work the same full time job I have been working for the last six years. I currently work from my home office full time. Once aboard, I will continue working from my home office. The only thing that will change is my home - from a townhouse to a boat.

The financing broker I've been dealing with is aware of all of this. I don't know if he's relayed any of it to the banks he deals with.
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Old 09-03-2009, 22:13   #20
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Have you tried another broker/lender? I talked to about 1/2 dozen lenders at a recent boat show they all said that they had money to lend and seemed eager to do so.
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Old 10-03-2009, 05:23   #21
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I agree with Tempest, talk to more brokers. I talked with 1/2 dozen at the Boston show last minth to get a feel for the current loan market and it didn't seem that there were any usual things (other than the end to lairs loans).
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Old 10-03-2009, 09:32   #22
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Have you tried another broker/lender? I talked to about 1/2 dozen lenders at a recent boat show they all said that they had money to lend and seemed eager to do so.
That's the same thing I experienced when talking to a bunch of them at the Annapolis show.

FYI - BoatUS doesn't ask if you're going to be living aboard or cruising. They do make you sign a no charter affidavit, though.

The biggest problem I had was them making us repeatedly change the contract and forcing the previous owners to re-register even though the boat was already on the hard and insured in my name.

Although, I will admit to having MUCH less in the bank now then I did when I filled out the application.
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Old 10-03-2009, 09:37   #23
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Kevingy, maybe I can help a bit. I have some experience in lending (decades) so based on everything I read maybe I can give a lender's point of view. I am not defending the lender, I don't know who that is, and don't want to know. But I can share with you briefly what is going through their mind as it pertains to risk, risk analysis and credit analysis. As I will not try to defend the lender, you may not like some of the answers either.

1) The lender will look at your total liquidity. How much you put down, how much you have remaining, and how much you earn. It is a sound indicator of risk. A cuustomer with $1.0 mil. is less risk that a customer with $100,000 who has less risk then a customer with $50,000 who is less risk than a customer with $10,000.

2) You asked if this has something to do with the economy. Yes. Credit has tightened or dried altogether throughout the economy. What funds that are being lent are being looked at carefully for risk. Nothing against you, you just picked a tough time to get a loan. The same holds true for billion-dollar corporations now as it does for you. CEOs are feeling the same pinch and emotions as you.

3) You said you are using a fiance broker. Is there a reason you are paying someone a premium to find you a loan? The internet and the phone can do the same things he is doing without paying him what could turn out to be a substantial premium in fees or interest rate the bank kicks back to him.

4) Here is the part I don't want to hurt your feelings. Please take no offense but as a lender looking at this: You are getting a boat that appears will be moored in salt water yet in your profile you live as far from water as one can be in Florida. (I actually used to live not far from there) Definetely not a reasonable comute distance from the Atlanic or Gulf. You said you plan on continuing to work, yet you stated you are leaving during hurricane season. The two statements are contradictory without further edification. Both make my antenna go up as a lender.

5) Finally, boats in general are a huge risk. No one gets a loan for a boat thinking they can't repay it. But it happens extemely frequently in this economy. The losses banks take on boats are huge. They can be staggereing. Even with substantial down payments, repossessions results in giant losses. The banks see this daily as they try to dispose of the boat inventory they have acquired. Think of it as once burned, twice shy. The have been burned a bunch.

I am on here occasionally, mostly I just read and don't say much. If you have a specific question, feel free to send me a note. All I ask is that you don't include your name or the lender's name. The more vague the details the better. In fact that is exactly how the lender is looking at it. Just details with no emotion. Just numbers and risk...

I hope this helps a bit.
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Old 10-03-2009, 11:09   #24
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Jonesee- thank you for your post. No offense has been taken. I appreciate any insight I can get.

The only reason I called the finance broker I called is because he has access to several banks. I thought that letting him shotgun the solution would yield better results than my tactical inquiries. Apparently, that was a poor assumption.

Concerning my work, I currently work from home as a full time employee had have for six years. It doesn't matter to my employer whether my home is a house, a boat, an RV, or a cardboard box, so long as I produce results and am able to send those results (usually source code) to the office via the Internet. As soon as I get the boat, I plan on letting the lease on my townhouse run out and move aboard. I made the finance broker aware of this. I'm not sure if he passed this along to the lenders.

While I agree that boats in general are a huge risk, I've been told that loans on sail boats are less risky than those on power boats. If you take a look at the sites listing foreclosed boats for sale, there are very few sail boats shown. Why are there not different requirements for loans on sail boats and power boats?
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Old 10-03-2009, 12:09   #25
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Your occupation and location make much more sense now, thank you.

The broker is not a bad idea. Just understand you are paying him a fee, either agreed upon, or more likely in the form of an up-rate on the loan that can really cost you over the years. If he is really good at what he does and has a solid reputation with his sources, he can sometimes "persuade" a bank to take a loan or make an exception on loan terms they might not otherwise do. If he is just "shotgunning the paper", you can do that yourself and save some cost.

As far as sailboat risk compared to motor boat risk, I intuitivley believe that to be true. I have never seen any data on it though. With out substantial data, the lenders are unable to create a risk model to reflect the difference (if in fact there is one). If the difference was substantial enough, I would assume BoatUS or some other lender that specializes in boats would have crunched the data and used it in their pricing matrix. Which is a final point. Any reduced risk would be reflected in the pricing models more likely than the risk models. Collateral risk and credit risk are two different animals.

One last note. Find out from your broker how many sources he has sent your application too. As more inquiries are made on your credit bureau, your credit score will be driven down. Credit score is a huge driver in all risk rating models I am familiar with. And think about a credit analyst looking at your bureau a month from now and seeing 6 other bank inquiries. Trust me, one of his thoughts is why wouldn't the other banks give him a loan before he got to me... Prudent selection of lenders is important to keeping your credit inquiries down.
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Old 10-03-2009, 12:40   #26
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When I first began looking at homes 20 years ago, the old qualifications of at least 20% down, and no more than 2.5 times your annual income were still very common guidelines. Even then one may not have qualified if they could not show reliable income, had other outstanding loans or so-so credit.

Today, many lenders and owners are both regretting that they changed their policies to accept much more liberal loans. A boat has even more risk, possibly more overhead and will most assuredly devalue, so while I understand your let down and frustration, I do understand why lenders are more conservative, especially in these economic times.

The other question that always comes to my mind when people tell me they have a hard time getting a loan, (for anything) is are they over extending themselves financially? If a lender thinks a financial decision is a bad risk, perhaps the person who feels they can't make the purchase without a loan should be reevaluating their decision as well.

All, I know about your financial situation is you said you didn't think you could afford to put down more than 20%. Not knowing more, I'll only speak for myself: I can't image taking on the financial risk of buying a boat if I could only afford to put down 20%. I've owned 3 homes and 3 cruising boats so far. Every home I've sold for notably more than I purchased it for, even considering upgrades. Every boat for notably less considering upgrades. Given the nature of slip fees, issues involved in upkeep of a sailing vessel, insurance, etc., the cost of ownership on a boat has always been much more dollar for dollar than a home. I just can't imagine taking on the financial risk of a boat at what many consider to be the minimum financial entry requirement for home ownership.
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Old 10-03-2009, 13:52   #27
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As far as sailboat risk compared to motor boat risk, I intuitivley believe that to be true. I have never seen any data on it though. With out substantial data, the lenders are unable to create a risk model to reflect the difference (if in fact there is one). If the difference was substantial enough, I would assume BoatUS or some other lender that specializes in boats would have crunched the data and used it in their pricing matrix. Which is a final point. Any reduced risk would be reflected in the pricing models more likely than the risk models....
A few thoughts on this.

1. While many aspects of an insureds risk are crunched to death, many are not. For example, ever look at purchasing life or health insurance and note that it often excludes something like scuba, sailboat racing, climbing, bungy jumping, sky diving, etc. but that what is excluded is not at all industry wide? The reason I was told is that these activities represent such small actual losses, few have worried about reliable data. It's more likely these things are excluded because someone at some meeting, just said they thought it was too much risk. These activities deal with such a small percent of potential customers they just don't care about determining actual risk. I work in the outdoor field professionally and when it comes to risk management I'm absolutely amazed how many decisions are made with no real risk data.

2. In terms of the insurance risk of power v.s. sail, I talked to a friend of mine who works in the insurance industry and often works with loan officers as well, and is famaliar with this. What he said, reflected your hunch that loan or insurance defaults on power boats are more common than sailboats. However, that's only part of the story. Most power boats that are reposessed he said are trailerable boats. It's easy to stick them on a trailer, take them to a secured facility and sell them at auction with many other boats. Cruising sailboats on the other hand, may represent less risk of ever being reposessed but when they do it's often a real pain. Imagine some old boat with outstanding insurance payments, outstanding loan payments and outstanding marina payments sitting on a mooring with with no working engine and no power. Imagine someone lives aboard as well. That represents a lot of headache, and even a potential liability, and is much harder to resell than a power boat on a trailer. I think most brokers will tell you cruisers kick tires a lot more than the typical power boater.
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Old 10-03-2009, 13:58   #28

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kevingy-
First off, if the boat you were looking at attracts you, talk to the seller or broker. Unless they are brain-dead, you can arrange to place a deposit on the boat "subject to finance" and a future date for completion, with a provision that you have the right to match any firm deal they get before then. So if they get a better deal--you've still got a chance. But if you get the money, you've still got the boat.
Expect that they may want a certain non-refundable deposit, or payment of the yard fees, but everything is negotiable. If you simply say "I'll be back" you all have nothing, and that benefits no one.

On banks and finance companies...be assured that they do have their reasons, and they won't discuss them because they don't want folks to circumvent them. You are self-employed, or work from home? Risk. You might move aboard and take the portable property (chattel goods) anyplace in the world, and since it is Florida with a hurricane season--you PROBABLY will take the boat away, or else risk losing it in storm season. You're not a land-owner, so your community ties are in doubt. (Mssrs. Washington and Jefferson et al wouldn't have let you vote, either!)
From the bank's point of view, there is RISK. They don't know you, they are not an old-fashioned Bedford Falls Savings And Loan. All they go by is statistics and actuarial tables, and right now the market doesn't want to loan money to anything with risk in it--because the rubes who lost alltheir money in the stock market can't buy the loans from them, and the rubes who lost ALMOST all their money, are just smart enough to be looking at investments with less risk. Take a boat out of state, abandon it and walk away...amd six months later the boat is worth nothing and the bank may have to pay salvage fees just to get rid of it. That's RISK.

They just won't loan money if there's risk--unless they can trick someone else into buying it, or make a much higher dollar to compensate. Are the criteria often nuts? Well, sure. After all, that's how the banking system got INTO this mess. They're all experts--at losing money.

A traditional marine lender might very well give you the loan--but also possibly at a higher rate. If you belong to a credit union, ask them. They're often the most generous, if you have a past history with them. And, often the best rates as well.

I know co-ops and condos where people are screaming because some owners have defaulted and the rest have to ante up for the slack. And others, where they ask for a 50% down payment before they'll accept any buyer. Yeah, that's steep--but there aren't very many screams from the latter group.
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Old 11-03-2009, 02:34   #29
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Oddly enough, I haven't had this problem. My portfolio value is a little less than the boat value (and dropping every day the market drops.)Kevin
That would mean your debt would be roughly equal to your equity level with the loan. I'm sorta with nautical62 on this. I'd be terrified to take on that much relative debt on a boat. How will it impact your ability to save for retirement? What if, god forbid, you had to go a year or more without full income? Does anyone even consider realistic retirement savings or emergency funds these days? I know too many people in their 50's with less than $100k in retirement savings and no pension who don't seem to be worried about it at all. I'm still trying to work up the bloody courage to spend 1/10th of my cash on hand for a boat so I'm probably at the other extreme, but still, some minimal safety net is probably not a bad idea. Best of luck in making it work.
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Old 11-03-2009, 06:16   #30
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I plan on living aboard and continuing to work the same full time job I have been working for the last six years. I currently work from my home office full time. Once aboard, I will continue working from my home office. The only thing that will change is my home - from a townhouse to a boat.

The financing broker I've been dealing with is aware of all of this. I don't know if he's relayed any of it to the banks he deals with.

If your income level does not support both the lease payment on the townhouse and a boat payment I can see where a bank might be hesitant.
I'm assuming that is why you are letting the lendor know that you are moving aboard. A sailboat is not something that a bank would view as good collateral. It depreciates rather than appreciates, foreclosing on a sailboat could be costly and a pain, add the hurricane factor ( they won't count on you moving) And they begin to view this as a high risk loan,
given the current climate,
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