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Old 17-04-2011, 10:13   #1
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Location: Plymouth Uk
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Boat Mortgage Pro's & Con's?

Ahoy shipmates, I'm looking to buy a bluewater cruiser this summer for myself and my family to live on. I'm considering a boat mortgage. I intend to have the house mortgage paid by the summer, but rather than save for the boat for a 1yr/18 mnths I'd like to get things underway, if you'll pardon the pun, and get in now while the cost of yachts are very reasonable. I understand that after 12 months you can pay of lump sums of the mortgage without penalty. I'm looking at getting an 80k mortgage, repaid over 3yrs. The house will provide income from rental to offset the mortgage repayments as well as regular lump sum repayments. Have any off you had any experience with yacht finance? Any pitfalls I should be aware of? Any helpful tips would be greatly appreciated. This will be the first step in fulfiling a dream. I want to make sure I don't step in any thing unpleasant.

Cheers.
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Old 17-04-2011, 10:38   #2
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Location: Caribbean winters, North Dakota/Minnesota summers
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Re: Boat Mortgage Pro's & Con's?

I looked into financing a boat awhile back and one thing I didn't know was that a lot of recreational financiers won't finance a boat 15 years old or older. So, something to consider when looking at purchasing and also something to consider when trying to re-sell several years down the road. You may be cutting out the people trying to go with certain loan companies if you have an older boat. Going through a local bank is completely different and there will be more options. Here in the states, as long as the loan is backed with real property, the mortgage interest is deductible for as many as 2 homes.
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Old 17-04-2011, 10:47   #3
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Re: Boat Mortgage Pro's & Con's?

A mortgage on a depreciating asset(?) scares me, but you're planning to pay it down right quick so that won't hurt so bad. Have you looked at a home equity loan? You might get a better interest rate and easier terms but I don't know about how they work in the UK.
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Old 17-04-2011, 10:52   #4
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Re: Boat Mortgage Pro's & Con's?

We have a loan on ours. At our age when we bought it (late 20's) our only option was to get a loan or drain every dollar we had from savings and still not be able to afford this boat.

We got a 15 year loan; we'll have it paid off on year 6. We overpay almost every month and have significantly chiseled into the premium, lowering the interest along with it, and in turn lowering the overall loan repayment amount.

It's never fun to have a debt floating around that you need to pay, but overall this has worked fine for us. It's our home, it's core to our sailing life, and it's where we're raising our daughter. Worth the loan.
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Old 21-04-2011, 09:54   #5
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Re: Boat Mortgage Pro's & Con's?

We have a mortgage on our boat. Our budget did not allow for us to buy a Nordhavn, even used, with the cash we had, and we didn't want to settle for a really old, lesser quality brand. We bought a brand new 43.

We feel like we made the right choice for our situation. We took 2 years off to circumnavigate the world. Had we waited and saved to pay cash, we likely would have never gone because we would have lost most of our savings when the stock market crashed in 2008. Some things to note:

Boat loans require a minimum of 25% down.

While we do have to pay interest, it is tax deductible.

If you have a mortgage, you have to buy the most expensive insurance coverage, so you will likely pay more in insurance if you do not have a mortgage.

In the last 5 years, our boat has depreciated about 10% (as costs rise for the manufacturer, new ones are becoming more expensive, so our used one is retaining a lot of its original value). Our house, however, has depreciated by 30%.
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