Marine Mortgage for Liveaboard

[sailcindy]

Hi Zengirl, I saw your post about financing. Who did you find a loan with? Was it in the U.S.? I am researching lending companies for financing a new boat.

[Montanan]

From a previous cruiser forum post on the same subject.



https://www.essexcredit.com/home/boat/rates/

Then select the liveaboard tab for their schedule of present rates.

All the best and happy of new year.

[hellosailor]

In the US a lot of these things will vary by state law. For instance, Bacchus really should be aware, as a Florida resident, that Florida is one of the few states where you can go bankrupt and have everything you own seized--except your residence. So if you have a $50 million dollar home, you can stiff all the creditors for everything you were worth, but they still can't touch your home. Now, what happens if your home is on a boat? Right, no lender in their mind is going to want to touch that.

In most (all?) other states, they can seize it. If you happen to stay locked below, hey, that's your problem, they can still seize the boat.

Now complicate things with the banking reforms (Sarbanes Oxley, etc.) after the 2008 crash. Lenders are not allowed to engage in risky business. They can't give you a mortgage unless they can show a reasonable expectation that they can repossess and sell that "home" in a pretty quick manner, at a fairly reliable market price, etc. and none of that says "boat" let alone "used liveaboard boat".

I suspect the same tightness in lending markets, lenders willing to take fewer risks in uncertain times, regardless of whether they are being specifically required to.

And depending on the written terms of a loan, selling off your existing residency and moving aboard full time MIGHT give the lender grounds to declare the loan payable in full immediately. One never knows what will be hidden in there. It certainly could change your cruising grounds, which could require changing your insurance, and if you let the insurance lapse...they notify the loss payee (the lender) and there goes the whole "now due in full" thing.

Be careful about paperwork dances. No matter what the parties tell you--read the papers to make sure it is so. If you're at a closing and someone drops twenty pages of fine print on you, don't be afraid to tell them "You might want to make some coffee, this is going to take me a while to read through." TFB if they don't like it, they could have sent you an advanced copy.

[jennlynnn]

Can the people who got the mortgages on boats please list bank names? Insurance companies cooperating? Saying you got a loan easily doesn’t help when we don’t know where to go? Or who to speak with? I have pretty good credit and some decent assets, I’ve gotten signature loans before but boat mortgages seem unique to certain lending institutions.

[sailcindy]

We are having an AMEL 50 built in France. Price around $1.2M. We are putting $600K down and borrowing $600K. Our credit is excellent. Essex did not work for us. We are not qualified for BoatUS as the boat is built outside the US. The following did approve a boat mortgage for us:

Sun Trust approved us for $600,000; 20 years (240 months); 5.64%; $4,168.09/mo.
Interest rate may change for the August timeframe to close. Approvals are good for 6 months. Rate is good for 45 days.
Manija F. Karim
Marine & RV Finance
SunTrust Bank
*Office:* ‪703-691-4479‬
Fax:***** ‪703-218-3152‬
Mail Code CS-ALX-7901
‪4020 University Drive, Suite 101‬
‪Fairfax, VA* 22030‬


LH Finance approved us for $600,000; 20 years; 5.99%; $4,295.13/mo
Interest rate may change. They do have a stipulation that there must be a U.S. dealer.
Dustin Howard
VP, National Retail Sales Manager
‪6958 Aviation Blvd, Suite A‬
‪Glen Burnie, MD 21061**‬
Direct : ‪(410) 689-4117‬
Cell : ‪(717) 679-0440‬*****************************
www.LH-Finance.com

[S/V Illusion]

This might be a self-inflicted problem in that you are calling it a "mortgage". The implication being it is real estate property. Semantics aside, what we are discussing here is a secured loan rather than a mortgage, the latter being secured by real estate, not toys, boats, cars, etc...

The market of financing sources for toys is endless whereas the market for mortgage lending is limited.

The wisdom of financing depreciating assets is another unrelated question worthy of a separate discussion.

[billknny]

Originally Posted by S/V Illusion

This might be a self-inflicted problem in that you are calling it a "mortgage". The implication being it is real estate property. Semantics aside, what we are discussing here is a secured loan rather than a mortgage, the latter being secured by real estate, not toys, boats, cars, etc...

Actually, that is not correct. In USA legal usage a "mortgage" is a secured loan where the property lien securing the loan is recorded in a public database, like the ship documentation registry. It does not have to involve real property at all.

In the USA, a loan on a state registered boat would be a simple secured loan, like a car loan, since the lien is not "publicly" recorded.

If the boat is USCG documented the correct term is a "ship's mortgage." That is what it is called and that is what it is, and what all the paper work will identify it as. Many lenders will insist on the USCG documentation for boat loans of more than a minimum value since the lien has a higher legal status.

This is not a matter of "semantics", but legal definitions. They matter.

[S/V Illusion]

Originally Posted by billknny

Actually, that is not correct. In USA legal usage a "mortgage" is a secured loan where the property lien securing the loan is recorded in a public database, like the ship documentation registry. It does not have to involve real property at all.

In the USA, a loan on a state registered boat would be a simple secured loan, like a car loan, since the lien is not "publicly" recorded.

If the boat is USCG documented the correct term is a "ship's mortgage." That is what it is called and that is what it is, and what all the paper work will identify it as. Many lenders will insist on the USCG documentation for boat loans of more than a minimum value since the lien has a higher legal status.

This is not a matter of "semantics", but legal definitions. They matter.

Virtually no mortgage lending officers would agree as they are generally unaware of the distinction. As I said, the "implication" is what causes the problem. People in the mortgage industry neither understand nor care about boat loans, are adverse to lending on a boat and oblivious to the implication of USCG documentation. That's what really matters here.

We can debate the academic exercise or talk in terms of the 'real world' which is what I was trying to describe.

[Bentwings]

I’ve been following this thread with interest but on the side lines. Frankly I’m tiny. I don’t have the finances y’all are dealing with but I’m in a similar but smaller situation. However I did find in my year long search for a loan in the USA that “livaboard” was an instant “no we can’t do that”. Insurance is much the same but slightly better.

I did manage to squeeze the real answer out of a couple lenders. It boils down to how they can recover if you default. Most states don’t allow you to be booted out of your home but they can probably take everything else including your dog. That would be a big incentive for me to remain current.

This is the long story story, I’ll try and make it readable word for word.

So I asked a local credit union that would have given me the loan if I was working but my income while adequate did not fit their model. I asked, If I already owned a boat that was paid for that I was currently livingaboard and had a land based address ( not PO Box ) for example, say I used my son’s address for mailing (paying him $50/month rent as though I was living there full time, thus creating a need for him to issue a rent credit statement for the year) (state requirement for landlords) ( I could actually live there if necessary); since I now had a permanent address and owned real property, boat, cars etc, if I could qualify for a boat loan within their financial model.

I said I’d do a lot of extended cruising with it, but I could winter at my son’s or my other boat.

It looks like if you can show a permanent residence and address then an extended cruiser would be in the picture. I would not want to get into a default situation. It could get real sticky real fast. Insuring the extended cruiser shouldn’t be an issue except out of the USA. My insurance notes this. There is an extra charge, I didn’t even ask how much. Our marinas require 1/2 million liability minimum. It was cheap for my pocket yacht. I pay more for my classic car.

I think it was Suntrust that would have given me the loan. The guy I talked to said he couldn’t give me pre approval as they didn’t do that. He said he would note the ability to make payment by the reduction of liability. Loan plus lower living expenses vs reduction of no rent with higher living expenses. An equation. I pushed for a closer idea of approval and he began to get “short” with me. Look he said just fill out the GD form and send it in. I know what the numbers are already. So I took that as a pretty sure approval but didn’t follow through. I paid cash for a smaller boat and I’ll move up later.

Sorry this is long and drawn out. I didn’t realize livingaboard caused these problems. It’s not real common up here in Minn. most are pretty hard core people and just want to relax and enjoy the last year’s of life.

Thanks for hearing me out.

[john61ct]

Same with trying to get credit for buying any "mobile home".

Soon as you say full time live aboard, 95% don't want to know you.

They want stable commuting wage slaves living in a S&B home.

Any hint of "alternative lifestyle" less shackled to the System reeks of Higher Risk to the approval committee.

[hellosailor]

I don't recall the details BUT do very much recall, at least ten years back, there were some issues with whether you could get what kind of boat loan and whether you'd have problems taking the boat as a second home for tax purposes, etc. Those were solved if the lender issued a proper "mortgage" status document. Sorry, the details are totally forgotten but yes, at least it WAS possible to have a boat "mortgage" as opposed to an ordinary loan. I expect a similar fine line, often insignificant, can be applied today.

You can't blame the entire "can't get a loan" situation today on the banks though. After the 2008 crash and some banking failures, the federal government passed Sorbanes-Oxley and some other laws, and required pretty much every financial institution to show that they had greater reserves, greater assets, ON HAND. And that any loans they issued were backed up by something--unlike the $250,000 home mortgages that Wells Fargo was issuing to houses with a currently appraised tax & market value of half of that.

So boats became risky business, and boat loans, especially to VAGRANTS...you know, if you get arrested and have bail hearing and they say "No community ties, no permanent residence, no fixed place of employment..." you're not going to get bail so easily either.

Now that the Fed has been (arguably quite recklessly) relaxing the asset and risk regulations, boat loans may loosen up by the end of the year as well. Whether they are called mortgages or not. But having a secured loan (secured by the boat) where the secured asset might be pretty much anywhere in the world and not easy to find or repossess....

Anyone here willing to make a loan to "some nice guys who promise they'll stick around" ??

With the increasing number of underperforming car loans out there...yeah, lenders are goin to stay nervous.