NEED HELP WITH FUNDING...EXCELLENT CREDIT

[maytrix]

Why not sell the house and find a smaller less expensive house if you really want a house to come back to? The problem with the reverse mortgage is that what if you need more money later? Your equity in it will drop the longer you own it due to the interest continuing to acrue.

My wife and I are looking at buying a 2nd home that will eventually become a primary home when we aren't on the boat - plan on 8 months on the boat and 4 months in the house roughly. But it will be a place we can call home and keep stuff we won't keep on the boat. Looking to get a place that may have rental opportunities as well to provide some extra income or at least cover taxes and upkeep maybe.

[satdiver]

Originally Posted by gwmort

Let me try giving you some numbers:

My house is worth about $350,000 and we will own it outright in about 2 years. We have about that much also in retirement investments, and my wife has a modest state pension, I want to be cruising well before we're old enough to take Social Security, so thats not really a factor.

My plan was to sell the house, buy a cat for around $300,000 and try to live on the investments and wife's pension. Assuming a 4% draw down rate and the pension I figure we would have a budget of around $2500 a month.

If we took a reverse mortgage on the house at 60% equity, we could take out $210,000, maybe use some of the investments to still get a cat for around $250,000, and an income of around $2,200 a month, but still have a land house to come home to and store our stuff.

I'd rather sell, my wife would rather keep the house, this looks like a reasonable compromise to me. Of course keeping the house means property taxes and upkeep expenses as well.

I've talked about this for years with people. I used to own one property which I lived in for 4 years. ( I went from liveaboard to dirt dweller back to liveaboard.) I sold my existing property and bought a property so I could 1031 (to avoid sales taxes) and to rent for a passive income. When I got the apartment I went in and fixed up the major problems and have never used a property management company. I'm now over 1000 miles from it and can count on one hand the amount of times I've had to deal with issues remotely. I make a point to get to the rental every 6 months to check everything and address issues.

After I fixed the apartment up which in NYC I had it reappraised and took the tax hit because I now could get a equity line of credit on it the apartment and the rent covered all my monthly cost except for taxes.

I now have my boat flagged out of the Caymen Islands which means once a year Jan 1st I have to make sure my boat is in the cayman islands for tax purposes, If I'm offshore diving at this time I'll typically have a friend or captain sail the boat over. I use to do the same thing from North to South Carolina to avoid tax implications. I do this legally and had it set up by a Admiralty Attorney.

Credit on a house is way better than a regular boat loan no matter how you look at it. Since I use my boat as a residence I get to write off my interest like a home since I did a 1031 on my rental property. But I recommend talking to a attorney about this not a CPA. If it's not done right you can get in trouble with the IRS easily.

[deluxe68]

Originally Posted by sailorboy1

If you have good credit and can not get a loan on the above you are not asking the right people.

So, who are the right people? Every time someone asks a question like this there are always people who say they have never had problems financing. One poster said he financed a 75 year old boat but did not name the bank. I tried getting pre-qualified thru a couple of the bigger companies specializing in yacht loans. They wanted liquid assets nearly equal to the price of the new boat. Can anyone just give a name of a bank or broker that will actually loan out money. i do not need naysayers telling me not to get a loan.

[Dave Lochner]

Try Sterling Associates, Sterling Associates

I used them last fall, they were very easy to work with.

Dave

[BandB]

Originally Posted by deluxe68

So, who are the right people? Every time someone asks a question like this there are always people who say they have never had problems financing. One poster said he financed a 75 year old boat but did not name the bank. I tried getting pre-qualified thru a couple of the bigger companies specializing in yacht loans. They wanted liquid assets nearly equal to the price of the new boat. Can anyone just give a name of a bank or broker that will actually loan out money. i do not need naysayers telling me not to get a loan.

No, no one can give you the name of a bank or broker that will actually loan you money because no one knows your entire situation. Often you can talk to a bank that turns you down and they might recommend someone else. You might also ask them what you would need to do to improve your situation and qualify. Six years ago sub-par loans were easy to get. After the billions lost, they're much harder now. You could also work hard to build credit quickly.

Someone remarked about credit being easiest for those who don't need it and that's the way it is. Older boats are bad risks for loans. It's not just the ability to repay, but the ability to insure is a concern. And the experience remains that the boat will be the first major item one defaults on.

[deluxe68]

Originally Posted by BandB

No, no one can give you the name of a bank or broker that will actually loan you money because no one knows your entire situation. Often you can talk to a bank that turns you down and they might recommend someone else. You might also ask them what you would need to do to improve your situation and qualify. Six years ago sub-par loans were easy to get. After the billions lost, they're much harder now. You could also work hard to build credit quickly.

Someone remarked about credit being easiest for those who don't need it and that's the way it is. Older boats are bad risks for loans. It's not just the ability to repay, but the ability to insure is a concern. And the experience remains that the boat will be the first major item one defaults on.

My credit rating is excellent, that is not the problem. I have been told by several sailboat brokers that in the past few years it has been next to impossible to get a boat loan unless you have liquid equity in the same amount as the loan. I just sold a 2010 Beneteau 36.7 and the only offers on the boat were from cash buyers. The credit buyers were not able to even pre-qualify for loans.

[BandB]

Originally Posted by deluxe68

My credit rating is excellent, that is not the problem. I have been told by several sailboat brokers that in the past few years it has been next to impossible to get a boat loan unless you have liquid equity in the same amount as the loan. I just sold a 2010 Beneteau 36.7 and the only offers on the boat were from cash buyers. The credit buyers were not able to even pre-qualify for loans.

Credit worthiness is more than just the score. And in this case, what they consider great is you having enough funds available to pay the loan if the boat sank the next day and wasn't recovered. Now there may be banks that would consider something short of that. It will really be a personal loan more than a collateral loan.

However, there are 43 members of the National Marine Lenders Association making loans. I know Essex is making them. Boat US. USAA. Have you tried submitting a request through eboatloans. There are people making sailboat loans. There is something about your situation that is preventing you from getting the loan. I don't know all your financial information to know. But you talk about living on investments and your wife's pension plus draw down equaling $2500 a month. Based on an income projected in that amount, no one is going to qualify you for a boat loan. Plus they tend to not want to count many investments. For instance, you mention the idea of keeping the house and then an income of $2200 a month. Just having a good credit score doesn't mean you're a good candidate for a loan of the size you're talking about. I've directed you to people making sailboat loans. I can't tell you though that they'll make one to you.

[jostalli]

Just judging from the flyers and discussions with marine finance companies at boat shows it seems like FICO score is used to determine your rate (higher rate for lower FICO). But, this is assuming you qualify for a loan at all. Are we in agreement that borrowers must have reserves equal to or greater than the boat value?

Can anyone step forward who did not meet this qualification for a loan approval?

I am desperate to find this out so people can adjust their budget now instead of spending months or even years planning to purchase a boat only to be denied.

[Dave Lochner]

Originally Posted by gwmort

Let me try giving you some numbers:

My house is worth about $350,000 and we will own it outright in about 2 years. We have about that much also in retirement investments, and my wife has a modest state pension, I want to be cruising well before we're old enough to take Social Security, so thats not really a factor.

My plan was to sell the house, buy a cat for around $300,000 and try to live on the investments and wife's pension. Assuming a 4% draw down rate and the pension I figure we would have a budget of around $2500 a month.

If we took a reverse mortgage on the house at 60% equity, we could take out $210,000, maybe use some of the investments to still get a cat for around $250,000, and an income of around $2,200 a month, but still have a land house to come home to and store our stuff.

I'd rather sell, my wife would rather keep the house, this looks like a reasonable compromise to me. Of course keeping the house means property taxes and upkeep expenses as well.

Banks don't like funky financing. They want to know where the money is to pay the monthly payment, where the downpayment is coming from, and do you have the resources to pay off the loan is in a total loss. The bank I worked with wanted to know how much cash I had, how much was in the retirement accounts, and how I was going to make the payments, i.e., what was my income.

[sailorboy1]

Originally Posted by deluxe68

So, who are the right people? Every time someone asks a question like this there are always people who say they have never had problems financing

Gee it isn't hard to find if you use your computer to search for the answer in places other than asking forums to just tell you. Even if you pickup a boating magazine there are ads in the them for companies doing boat loans.

In the past 3 years I financed my second boat and was approved by both Essex Credit and Suntust Bank (this was though BoatUS). That boat was 10 years old at the time.

5 years ago I financed my first boat though Essex Credit and at the time that boat was 20 years old.

People saying they have good credit and financial qualification having trouble getting a loan means there is some other issue. The finance companies WANT to make loans.

[jtsailjt]

Originally Posted by Capt.Alex

I sleep well knowing I can pay off my boat whenever I want. I also sleep well knowing most of my assets are making money to support my cruising habit

Of course you're sleeping well now...just as long as the market is near record levels and is generally rising, but one thing's for sure, that won't always be the case with the market. I do understand the potential advantages of leveraging your money through borrowing but one thing the financial turmoil over the last decade or so has taught us is that there's at least an equal downside to it. When you have committed to using money that your investments spin off, your ability to sleep well will be impacted much more than if you were not depending on your investments for anything, at least for the time being. I plan to use my investments to supplement my retirement but before I start counting my chickens I want them to be fully hatched (ie out of speculative investment vehicles that would pay me more than banks are charging for things like boat mortgages).

If the value of your boat is a small part of the amount you have invested and you could afford to easily make your boat payment without your investment income, then that's a different story and I can better understand getting a boat loan. But generally speaking, I think that counting on a speculative investment that could actually decrease in value to pay off a bill that will arrive monthly whether the market goes up or down, will eventually lead to more sleepless nights for most people than if they just saved up and paid cash for whatever boat they can afford and then enjoyed it without any thoughts in the back of their minds of what their investments are doing.