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Old 18-09-2014, 19:42   #91
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Re: I am being told that Liveaboard Boats loans are now impossible

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Originally Posted by TacomaSailor View Post
That is the advice I am getting from all the brokers - I just did not know any of this prior to trying to buy a new boat in the new lending environment.

We have never financed a boat while being full time live aboards and this all caught me by surprise.

Those of you who are suggesting we pay cash - do you have any idea what the tax brackets are above $150,00?

28% from $148,851 to $226,850 ($21,840 tax)
33% from $226,851 to $405,100 ($58,823 tax)

We only pay a 15% rate now and I sure do not want to pay MORE than DOUBLE our current tax rate (33% compared to 15%) just so we can own a bigger boat. Our current boat is perfectly acceptable if buying the new boat means we pay an additional $65,000 or so tax.

I think I got the answer here I needed - we must develop a shore side residential presence in order to qualify for a loan. WHO KNEW?

I guess a perfect credit history, long cruising history with a local boat mortgage, and bullet proof fixed retirement income is still not sufficient to make a lender happy.
Thanks for pointing this out. I was planning on paying cash for a boat because I hate borrowing, but the tax consequences may cause me to reconsider.

My wife and I will be meeting with several financial planners and tax consultants over the next several months and I will keep this in mind. Our budget is much smaller, but it still needs to be considered.
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Old 18-09-2014, 19:47   #92
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Re: I am being told that Liveaboard Boats loans are now impossible

With my oldest being 17yrs old...I'm a ways off from Grandkids...but when I retired and went cruising at 38yrs old...it was damn boring to me. But my wife tells me that the type of personality that gets to retire at 38yrs old is also the same type that can't sit still long enough to enjoy it...she could be right about that.
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Old 18-09-2014, 20:29   #93
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Re: I am being told that Liveaboard Boats loans are now impossible

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With my oldest being 17yrs old...I'm a ways off from Grandkids...but when I retired and went cruising at 38yrs old...it was damn boring to me. But my wife tells me that the type of personality that gets to retire at 38yrs old is also the same type that can't sit still long enough to enjoy it...she could be right about that.
I did and didn't....retire that is. Actually true for both of us. I left my full time employment as did my wife. However, we decided that maybe owning some sort of small business might make sense and then it became more. Plus about one day a month I do a project for my former employer. My wife just looks at me like "I knew you couldn't do it" and giggles. But she's right. We enjoy still having something going on and we can do our part even remotely. But we follow and provide input and have our roles. Not as bad as the guy who retires but buys a marina and works harder than he ever did. But involvement still in business without any significant risk. This time more as a hobby than a profession. I was 41 when I "retired".

Now in her case, she was a teacher specializing in reading programs. And she was only 33. So she's involved with me in the business but also has her own thing putting in new reading programs in various schools and districts and for orphanages and other groups. All volunteer. Incredible rewards as these are often situations where they couldn't pay to have someone do it at this time.

I think in our case we wanted the freedom and didn't want to be tied down. Also didn't want to work as hard. But still there were parts of our professions we loved and holding on to some part of that was needed. We weren't ready to go cold turkey yet.
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Old 19-09-2014, 08:46   #94
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Thumbs up Re: I am being told that Liveaboard Boats loans are now impossible

Dear Tacoma,
The one rule of purchasing a boat is to be vague. Never, Never, Never let them think or get the idea that you will be living aboard, Period !!!! If you have good credit and have shown ability to be responsible, then it's your money and will someday be your boat. What you do with it and how often you stay on it is none of there business. And don't get me started about Frank-Dodd debacle. A PO Box works especially in rural areas. So if they want a land base, and you have money, rent an apt for six months, but use the PO Box for an address. Just my 2 cents.
Good Luck and consider Donna Ryan with New Coast Financial services. Tell he Rick Delaune sent you.
Smooth Sailing, Capt'n Rick
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Old 19-09-2014, 10:16   #95
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Re: I am being told that Liveaboard Boats loans are now impossible

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Originally Posted by TacomaSailor View Post
.................

Those of you who are suggesting we pay cash - do you have any idea what the tax brackets are above $150,00?

28% from $148,851 to $226,850 ($21,840 tax)
33% from $226,851 to $405,100 ($58,823 tax)

We only pay a 15% rate now and I sure do not want to pay MORE than DOUBLE our current tax rate (33% compared to 15%) just so we can own a bigger boat. Our current boat is perfectly acceptable if buying the new boat means we pay an additional $65,000 or so tax.
................................
I don't see that you have identified the form of tax that you are referencing and wether these numbers are considering state sales and income taxes, but there are some advantages in looking at some different states. Not only Florida, but others too.

These numbers would cause people to make careful choices about the location of their purchase and vessel use. As of July 1st, 2010 there has been a tax cap limit placed on the 6% Florida state sales tax on boat purchase or the use tax for currently owned vessels to $18,000. In addition Florida has no state income tax.
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Old 19-09-2014, 10:33   #96
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Wait, what? What does income tax have to do with how you finance your boat?
Yea I'm try to connect those dots too
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Old 19-09-2014, 10:43   #97
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Re: I am being told that Liveaboard Boats loans are now impossible

My guess would be the tansfer of a large sum from a tax deferred account that would make the boat purchase price also taxable income. I've had some experience with the IRS recognizing a vessel as a primary residence. If one had no other primary residence at the time of purchase (former house sold) could this represent a tax advantage?
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Old 19-09-2014, 10:54   #98
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Re: I am being told that Liveaboard Boats loans are now impossible

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Those of you who are suggesting we pay cash - do you have any idea what the tax brackets are above $150,00?

28% from $148,851 to $226,850 ($21,840 tax)
33% from $226,851 to $405,100 ($58,823 tax)

We only pay a 15% rate now and I sure do not want to pay MORE than DOUBLE our current tax rate (33% compared to 15%) just so we can own a bigger boat. Our current boat is perfectly acceptable if buying the new boat means we pay an additional $65,000 or so tax.
Those screaming to increase taxes on the "evil rich" playing the class envy game have absolutely no idea the damage higher taxes have on the US Economy. The "rich" are the only ones paying income taxes in the fist place...yet the OWS folks scream you must pay more. Sorry...you just won't spend the money that will create the sales commissions along with the sales taxes that the new gear you would need to buy would create. Everyone loses because the Class Envy guys were screaming "Tax the Rich".

Tacoma Sailor just let people peak under the covers at how people make decisions based on Taxes. It's called Economics 101 folks. If your taxes are to high...you say screw it and don't spend the money. Ask the Yacht Manufacturers how the "Luxury Tax" worked out. Yea....tax the rich, those evil 1%-ers need to pay....ha ha ha...No it is the little guy that suffers when evil rich don't spend their money due to tax considerations.
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Old 19-09-2014, 12:01   #99
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Re: I am being told that Liveaboard Boats loans are now impossible

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Wait, what? What does income tax have to do with how you finance your boat?
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Yea I'm try to connect those dots too
He stated earlier that the money is in a retirement account and the taxes he is referring to are taxes/penalties for early withdrawal.

Tacoma, while it's unfortunate that you cannot seem to manage what you are trying to do in the exact way you want to do it, you are not in the world's worst situation. You could move into a shoreside residence and try it, but you don't want to. I don't blame you. But you have a 40 foot boat now so the world of cruising lays available to you. And you apparently have a nice retirement account sitting somewhere to give you the security to enjoy it. With time the lending situation could change. If there's one thing we can count on being constant, it's change. Enjoy your 40' boat, and your retirement account, and try again later when the financial environment is more favorable.
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Old 19-09-2014, 12:14   #100
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Re: I am being told that Liveaboard Boats loans are now impossible

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He stated earlier that the money is in a retirement account and the taxes he is referring to are taxes/penalties for early withdrawal.

.
Of course, most retirement accounts are protected from creditors so the idea that it could be put up as collateral without first moving the money from the account and paying income taxes on it...kills the whole tax saving idea.

Reality is from the banks point of view, there is an asset that will be taken out of the country where it will be difficult to track down and accounts put up as collateral are protected, so they essentially would have to approve a very large unsecured personal loan and they came to the conclusion that is not a good idea.
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Old 19-09-2014, 12:32   #101
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Re: I am being told that Liveaboard Boats loans are now impossible

We went through a time where loans were made left and right to anyone on any home. That led to record foreclosures and a huge percentage of people late on mortgage payments as well as huge losses for the banks requiring government assistance.

The natural thing next is for loans to get very tight and for extra care to be exerted. The days of just thinking you're going to get the loan you want are gone. In the future it may head back to a middle ground.

But the problem here is regardless of all you have in retirement or anywhere else the lenders do not consider you credit worthy for the money you want for the purpose you want to use it. There is no industry wide declaration that loans won't be made to liveaboards. Each lender has their own practices and each loan application is different.

You have an income you claim is over $150,000. But in spite of that you don't have the available cash nor do you have other assets for collateral to support the boat loan. Given that then you're wanting to borrow money based on repaying from future earnings and, at the same time, you're talking about taking the boat out of the US for five years at a time. So, leaving the lender with basically no easily recoverable collateral. They must depend on your future income and depend on you using it to pay them. All because you say you will. They can't and shouldn't be able to do that. If I was a shareholder in that bank, I'd sure not want them doing things like that.

Yes, perhaps we are to the point on a situation like yours to where the only people they'd make the loan to are ones who don't need it. But the risk is so huge.
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Old 19-09-2014, 12:41   #102
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Re: I am being told that Liveaboard Boats loans are now impossible

The cash we would need to spend is in deferred compensation plans that have been converted to IRAs. That means we have not paid any Federal, State, Local taxes on the money in those IRAs. The Feds and California treat any money we withdraw from those IRAs is treated as ordinary income in the year(s) we withdraw it.

We pay no early withdrawal penalties because I am 67 and my wife's plan is structured so that early withdrawal penalties do not apply.

I began my investing career in the days of very high inflation and very high marginal rates (Gerald Ford/Jimmy Carter times). I am abnormally sensitive to paying taxes and am paranoid about inflation diminishing our investment returns. But, I love to borrow money at a fixed rate and pay it back with inflated dollars.

I have spent a couple days analyzing the tax implications of paying cash.

Assume we put 50% down on a $500,000 boat and then pay off the remaining balance in less than four years.

During that four years - We would pay $85,000 more in Federal taxes (ordinary income) than if we stuck with our current spending pattern and withdrew the same amount of money over an extended period of time.

That works out to about $2,000 PER MONTH! in extra taxes.

While we want a bigger boat, particularly a nice big catamaran, I can not bring myself to give Uncle Sam all that extra money just to access our hard earned money.
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Old 19-09-2014, 12:55   #103
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Re: I am being told that Liveaboard Boats loans are now impossible

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The cash we would need to spend is in deferred compensation plans that have been converted to IRAs. That means we have not paid any Federal, State, Local taxes on the money in those IRAs. The Feds and California treat any money we withdraw from those IRAs is treated as ordinary income in the year(s) we withdraw it.

We pay no early withdrawal penalties because I am 67 and my wife's plan is structured so that early withdrawal penalties do not apply.

I began my investing career in the days of very high inflation and very high marginal rates (Gerald Ford/Jimmy Carter times). I am abnormally sensitive to paying taxes and am paranoid about inflation diminishing our investment returns. But, I love to borrow money at a fixed rate and pay it back with inflated dollars.

I have spent a couple days analyzing the tax implications of paying cash.

Assume we put 50% down on a $500,000 boat and then pay off the remaining balance in less than four years.

During that four years - We would pay $85,000 more in Federal taxes (ordinary income) than if we stuck with our current spending pattern and withdrew the same amount of money over an extended period of time.

That works out to about $2,000 PER MONTH! in extra taxes.

While we want a bigger boat, particularly a nice big catamaran, I can not bring myself to give Uncle Sam all that extra money just to access our hard earned money.
That's certainly a logical choice to make, just as turning you down for the loan is. All this money in IRA's and other retirement vehicles means nothing to a lender.
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Old 19-09-2014, 13:09   #104
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Re: I am being told that Liveaboard Boats loans are now impossible

"You have an income you claim is over $150,000. But in spite of that you don't have the available cash nor do you have other assets for collateral to support the boat loan. Given that then you're wanting to borrow money based on repaying from future earnings and, at the same time, you're talking about taking the boat out of the US for five years at a time. So, leaving the lender with basically no easily recoverable collateral. They must depend on your future income and depend on you using it to pay them. All because you say you will. They can't and shouldn't be able to do that. If I was a shareholder in that bank, I'd sure not want them doing things like that. "

I hope I did not claim to have a $150,000 income. The IRS would feel I have been mis-leading them all these years. Our mutual funds, inside an IRA, do grow enough that our total income, including that tax free amount, might reach $150k but our taxable and spendable income is way less than HALF that amount.

The highlighted statement above emphasizes the puzzling aspect of this issue.

The loan amount was initially approved by two lenders. So, it appears that they have no problem with our income, our credit history, or our collateral.

Only when they determined that our physical address was in a marina and our mailing address was a PO Box did they begin to question the loan.

They then told us to go rent a place for six-months and show us the rent payment receipts and utility receipts and the loan would be approved.

HOW does us renting a place provide any security at all to the bank? As others have suggested - we could move out of the rental property the day after signing the loan documents.

And, the issue of a boat being a mobile collateral object is EXACTLY the same for any boat. We took our boat, with a mortgage on it, out of the US many times for extended periods when we owned a huge house that we had lived in for decades. That house was worth many times the value of the boat but provided no security at all to the lender. Primary residences in most states are not subject to seizure in a bankruptcy so if I wanted to 'disappear" the boat and declare bankruptcy I would be home free!

The highlighted statement above is a valid argument for lenders never making a loan for any boat big enough to be transported outside the US. That would be any fishing boat or day sailor on a trailer, 25' sailboats in Florida or California or almost any boat on the Great Lakes.

The statement about borrowing against future earnings is valid and another issue I do not understand.

We live on our fixed incomes (pension and social security) and an occasional small withdrawal from one of our IRAs. We manage our expenses so we seldom have to touch our IRAs which, therefore, have grown to be significant assets.

The potential lenders want us to show a "history of regular withdrawals" from those IRAs.

My questions are:
-Why would we show a history of regular withdrawals if we do not need the money?
-What are we supposed to do with the withdrawn money if we don't have expenses?
- Why is $10,000 in a CD or interest bearing checking account a "better quality asset" than the same $10,000 in a mutual fund growing at 12% a year tax free?
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Old 19-09-2014, 13:43   #105
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Re: I am being told that Liveaboard Boats loans are now impossible

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We went through a time where loans were made left and right to anyone on any home. True. That happened because of greedy mortgage brokers and mortgage co. execs. giving loans out - not for the good of the people, but for their own greedy commissions. They knew those people wouldn't be able to make the balloon payment or keep up with the ARM. That led to record foreclosures and a huge percentage of people late on mortgage payments as well as huge losses for the banks requiring government assistance. Many of the missed payments and foreclosures didn't happen until AFTER all of the overleveraged (read - greedy) Wall St investment banks toppled like dominoes. THat caused a recession which cost many people their jobs, then the risk of the subprime loans actually became a reality. Prior to that, people were still making their loan payments.

The natural thing next is for loans to get very tight and for extra care to be exerted. The days of just thinking you're going to get the loan you want are gone. In the future it may head back to a middle ground. The more logical approach is to lend money to people who ARE a good credit risk, but not allow greedy Wall St bankers to leverage their companies at 50:1 or even 100:1 like they did in 2008. Don't make bad loans, but don't punish average borrowers for the actions of the criminally greedy who got named in the aftermath but never prosecuted by their friends in gov't. For actual names, dates and crimes, watch the documentary "Inside Job." Excellent movie piecing together all of the guilty parties in academia, Wall St and Capitol Hill.

But the problem here is regardless of all you have in retirement or anywhere else the lenders do not consider you credit worthy for the money you want for the purpose you want to use it. There is no industry wide declaration that loans won't be made to liveaboards. Each lender has their own practices and each loan application is different.

You have an income you claim is over $150,000. But in spite of that you don't have the available cash nor do you have other assets for collateral to support the boat loan. Given that then you're wanting to borrow money based on repaying from future earnings and, at the same time, you're talking about taking the boat out of the US for five years at a time. So, leaving the lender with basically no easily recoverable collateral. They must depend on your future income and depend on you using it to pay them. All because you say you will. They can't and shouldn't be able to do that. If I was a shareholder in that bank, I'd sure not want them doing things like that.

Yes, perhaps we are to the point on a situation like yours to where the only people they'd make the loan to are ones who don't need it. But the risk is so huge.
I don't know why, but have you considered selling your boat first, then using the proceeds from that to help pay cash for the new boat? Or do you want to keep the first boat for some reason?

Just trying to find a possible solution.
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