financing

[scarlet]

My husband and I are interested in a particular boat, and are discussing cost, financing, etc. So I have a few questions.

We have the cash to pay for the boat, however, our ROI in our investments is much higher than interest rates right now, so it makes sense for us to take out a loan, and if the markets slow down, or drop, we will take cash out and pay off the boat. That being said, we are looking for a good lender. I've contacted Essex, and frankly, have not been impressed at all. They want a complete application including secured slip, and insurance before they will even let us know if we qualify for the amount we are lookin for. We haven't even made an offer.. and we don't want to make an offer until we feel comfortable with our plan. So, I'm a bit frustrated with them. So, If you have worked with a great lender... please let me know.

Second, Any advice on what to offer? I've done a comparison of other boats in the market, and it is reasonably priced. I know that if the inspectors find an issue, I can lower the offer a bit to compensate. But I know often times these boats sell for under their asking price... When you all bought your boats... how far below asking price did you start off at? is there any place to find asking price vs. purchase price?

Thanks in advance.

[Davy J]

We have the cash to pay for the boat, however, our ROI in our investments is much higher than interest rates right now, so it makes sense for us to take out a loan,

Um,.... ah,... a boat is a depreciating asset. Taking out "a loan", makes the equation worse. Can your investments "overcome" the expenses?

[scarlet]

Originally Posted by Davy J

Um,.... ah,... a boat is a depreciating asset. Taking out "a loan", makes the equation worse. Can your investments "overcome" the expenses?

Already calculated for depreciation and added it into the equation, and adjusted our figures.. People take out loans all the time so that they can keep their money working for them. We did that with our car purchases. (also a depreciating asset). You buy a brand that holds their value better than most... put down enough money to cover that depreciation.. take out a loan for the rest, and keep your cash in your investments. Kept a watch on investments, and as long as the return was more than our interest, we kept the money there. If it dropped to below the interest, we've taken the money out and paid it off. Also, with this going to be our home, we will get to deduct the interest on our taxes.. I think we can deduct $10,000 (this is from memory, I would have to go back to the tax code to see the exact figure) We've increased our net worth dramatically by doing this with large purchases over the years. We've also had our financial advisor concur.

Loans can be a great tool, if used right... don't discard them so quickly...

[chris mac]

Hi scarlet, once again we are at the same stage as each other. We are dealing on a boat now as well. Since our house is up for sale, it was easier for us to borrow against it. The banks are happier that way too. So better rate and no extra restrictions on the boat. I'm not sure if it's the same in the us, but we (in canada) are able to borrow against non registered investments as well. That was our backup option that fortunately didn't need. I believe you can borrow up to 50%
As to what to offer.. That depends on the boat, how long it's been on the market, its age, condition, ect. A broker could help with that, or lots of Google searches.
Good luck and d let us know how it works out.

[a64pilot]

I always love how people say they are making more money from their investments than they can borrow money for.
It means they are smarter than the banks, or why else wouldn’t the bank invest it like you did as opposed to lending it to you?
It reminds me of the people that are sure they are paying less for the car than the dealer did, they can show you the invoice that “proves” it, although that game was decades ago, surely it’s run its course by now.

What happens with your plan of if our investments drop in their return we will just cash them in and pay for the boat, is that of course you don’t have a fixed amount of money and are earning interest, you will see a sharp decrease in what your investments are worth, you’ll have less money, with which to pay off the boat, so the boat will cost much more of the percentage of your assets.

Just buy the boat like the rest of us, and if that means you have to buy an older boat, then either continue to save and revisit this later, or buy the older boat.

[scarlet]

Originally Posted by chris mac

Hi scarlet, once again we are at the same stage as each other. We are dealing on a boat now as well. Since our house is up for sale, it was easier for us to borrow against it. The banks are happier that way too. So better rate and no extra restrictions on the boat. I'm not sure if it's the same in the us, but we (in canada) are able to borrow against non registered investments as well. That was our backup option that fortunately didn't need. I believe you can borrow up to 50%
As to what to offer.. That depends on the boat, how long it's been on the market, its age, condition, ect. A broker could help with that, or lots of Google searches.
Good luck and d let us know how it works out.

Hi Chris!!! how are you?! If I can ask.. what kind of extra restrictions do they have on financing boats? Just curious because we are in the beginning stages. If you want to drop me a private message, I'd love to hear about the boat you are looking at. WE could share the experience...

[scarlet]

Originally Posted by a64pilot

I always love how people say they are making more money from their investments than they can borrow money for.
It means they are smarter than the banks, or why else wouldn’t the bank invest it like you did as opposed to lending it to you?
It reminds me of the people that are sure they are paying less for the car than the dealer did, they can show you the invoice that “proves” it, although that game was decades ago, surely it’s run its course by now.

What happens with your plan of if our investments drop in their return we will just cash them in and pay for the boat, is that of course you don’t have a fixed amount of money and are earning interest, you will see a sharp decrease in what your investments are worth, you’ll have less money, with which to pay off the boat, so the boat will cost much more of the percentage of your assets.

Just buy the boat like the rest of us, and if that means you have to buy an older boat, then either continue to save and revisit this later, or buy the older boat.

Have you not seen the stock markets?!?! in 2017 we got 12% return..2018 we were over 13% and this year to date, we are 8.6%. still double the current interest rates on boat loans. There is no better time in history to invest than now. If you like, I'm happy to give you the name of our financial planner.... and I'm sincere on that offer.

[a64pilot]

Thanks but I’m rather heavily invested myself and have my own planner.
However I don’t expect it to continue, I’ll ride it as long as I can of course, but I know it’s going to end.
It depending on when you look at our finances is about 1/3 or our income. We both have retirements and of course upcoming social security.

I think if your planning on retirement, your better off with money invested, and no money owed, even if that means less money invested. But don’t bank everything on those investments either, have other income of some form, enough to cover expenses so that worse case you just take a hit in standard of living, but still have the necessities covered.

Do not plan on past performance to determine future returns, the world is full of people who have gone bust on that.

There is some saying about when the shoe shine boy is giving stock market advice, it’s time to get out.
Well I think he is giving advice.

What that means is of course by the time the non professional, non ultra rich discover any investment vehicle as a means of making money, the majority of the money has already been made. Stock Market, Real Estate, it doesn’t matter, it’s all the same

[dfelsent]

There is no better time in history to HAVE invested than the past few years is what you are saying. Remember that past returns are not a guarantee if future returns. As someone who as worked in quantitative finance for a while I say watch out for selection bias.
If you buy your boat on margin, (which I have done) be ready for the margin call. And ready to accept the consequences. Which I have done. No regrets, eyes were open.
Make certain you understand the real risks and are willing to accept he real consequences.

Cheers!!!

[scarlet]

Originally Posted by a64pilot

Thanks but I’m rather heavily invested myself and have my own planner.
However I don’t expect it to continue, I’ll ride it as long as I can of course, but I know it’s going to end.
It depending on when you look at our finances is about 1/3 or our income. We both have retirements and of course upcoming social security.

I think if your planning on retirement, your better off with money invested, and no money owed, even if that means less money invested. But don’t bank everything on those investments either, have other income of some form, enough to cover expenses so that worse case you just take a hit in standard of living, but still have the necessities covered.

Do not plan on past performance to determine future returns, the world is full of people who have gone bust on that.

There is some saying about when the shoe shine boy is giving stock market advice, it’s time to get out.
Well I think he is giving advice.

What that means is of course by the time the non professional, non ultra rich discover any investment vehicle as a means of making money, the majority of the money has already been made. Stock Market, Real Estate, it doesn’t matter, it’s all the same

My husband is a retired colonel in the airforce… so, he gets his full retirement, and he still works as a government contractor... we both will have SS, and we have plenty in investments. So, we are already set for life... and we are well diversified.

But anyway.. hopefully someone will be able to answer my questions. Thanks for you input.

[Calif.Ted]

A couple decades ago I got a "ships mortgage" thru a loan broker similar to Essex, I can't remember the name right now. The loan actually ended up being financed by B of A in Georgia, I'm in California, beats me, they just market them I guess. I don't remember it as being any difficulty however I think there were factors that may have contributed to that.
It was a documented vessel less than 10 years old, loan was 25% of purchase price, it was not a live aboard, I did own similar vessels in the past, I did have a slip agreement and an insurance policy. When I sell a boat I don't cancel the insurance I "suspend" it, they don't charge me but I have an "active" boat policy, when I buy a boat I call and the new boat is "added" to the old policy.
They really only care about your credit "worthiness" because the last thing they want is a used sailboat. Anything rating over 800 ought to suffice.

[Lost Horizons]

Originally Posted by scarlet

But anyway.. hopefully someone will be able to answer my questions. Thanks for you input.

Try a Credit Union.

[scarlet]

Originally Posted by Lost Horizons

Try a Credit Union.

We bank with Navy Credit Union, and they don't offer loans... but I'll call around and see what I can find... Thanks for the suggestion. I hadn't thought of checking with them.

[Sparx]

Let me recommend a yacht mortgage broker. Mr Dunford found us a useful loan and was easy to work with. His contact info is below.

Robert Dunford, Jr (203) 944-6555
rpdunford@tridentfunding.com

[BigVee]

Originally Posted by a64pilot

I always love how people say they are making more money from their investments than they can borrow money for.
It means they are smarter than the banks, or why else wouldn’t the bank invest it like you did as opposed to lending it to you?

Might I suggest that we stick to things we know. Your theory about how banking works is dead wrong. Also, your understanding of the leverage concept used by the OP is also flawed. This is not the forum to explain it to you.