Home Equity Line vs. Boat Loan

[jimp1234]

We're thinking about financing part of the purchase price of our boat and was wondering if there's any reason to use a boat loan versus a home equity line. As far as I know you can write off the interest in both cases (home loan interest vs second home interest). T or F? Btw, we're not intending to be live-a boards but rather "commuter cruisers", with my wife being self employed and continuing to work with my work status changing from full time to part time project work. We're generally looking to purchase for cash, or close to cash as we can but not too worried about carrying a little debt if we find a boat that's newer, has been refurbished by the prior owner, etc. TIA

-Jim

[sailorboy1]

Do the one with the best terms. Other that it's whether it's putting the house at isk or the boat

[chris mac]

US may be different, I'm in Canada. You will get a much better interest rate off of a heloc vs a boat loan. House secured vs depreciating asset secured.
That is assuming you still have a house to secure the loan against, and the equity available.
Obviously cash works well too.

[Calif.Ted]

For a boat or yacht loan with rates comparable to home loan rates most lenders have a $50,000 minimum loan amount. A couple decades ago I did have a loan for only $25,000 and I can't remember who the lender was but they were the only exception.

[Flyingriki]

Debt is a bad idea unless it provides the means for earning or a roof over your head that can appreciate. Home equity is amortized in such a way as to cost you twice as much in the end, if not more. You decide if that boat is worth that much.....

[belizesailor]

IMHO, financing a depreciating, non income producing asset is a bad financial decision. A boat is already a bad financial decision, why make it worse by financing.

Home Equity Loans are also a bad idea.

Save some freedom chips and pay cash for a boat you can afford.

[wristwister]

A boat loan will come with lots of rules and restrictions, like a clean survey, insurance requirements, offshore and international sailing restrictions etc. Whereas going the home equity route comes with none of that. If you must finance, the equity route will give you total latitude on what boat you buy and what you do with it.

[roverhi]

If the **** should hit the fan, the economy collapse, your job(s) disappear and you have a home equity loan that you can't make the payments on, you'll lose the house to foreclosure in most states. With a boat loan, your credit rating and the boat are the only things that will be at risk.

As others have said, borrowing money to buy a boat isn't the economically smartest thing to do. But then buying a boat isn't the smartest thing to do economically but then I have two boats.

[Kenomac]

If you have the means to make the monthly payments, and it sounds like you do, take out the loan with the best terms and conditions and purchase the nicest boat you can afford. Debt can be a good thing when it allows you to enjoy many more years on the boat of your dreams, instead of wasting them by saving up and paying cash for some old clunker then fixing it up.

[vciavarelli]

roverhi said:
If the **** should hit the fan, the economy collapse, your job(s) disappear and you have a home equity loan that you can't make the payments on, you'll lose the house to foreclosure in most states. With a boat loan, your credit rating and the boat are the only things that will be at risk.
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I 2nd this thought, why , if you are going to have a loan in the first place, jeapordize your home if something really bad happens financially.

[SailtheWind]

Originally Posted by jimp1234

We're thinking about financing part of the purchase price of our boat and was wondering if there's any reason to use a boat loan versus a home equity line. As far as I know you can write off the interest in both cases (home loan interest vs second home interest). T or F? Btw, we're not intending to be live-a boards but rather "commuter cruisers", with my wife being self employed and continuing to work with my work status changing from full time to part time project work. We're generally looking to purchase for cash, or close to cash as we can but not too worried about carrying a little debt if we find a boat that's newer, has been refurbished by the prior owner, etc. TIA

-Jim

You deduct the interest for either loan if the boat meets certain requirements. To qualify as a second home or vacation home it must have sleeping quarters, a head and a galley. If you can cook go to bathroom and sleep it is a "home" Does not have to be fancy but it is a must have.

The big difference I see between the two loans is that the home equity is usually for a maximum of 10 years and has a variable interest rate. The boat loan is a mortgage on the boat with a fix rate for the term of the loan 10, 15 or 20 years. You have no surprises when the interest rates go up since it is fixed.
Cash is king but if you are financially secure have a good job with a study income why wait years to live the dream?...

[Cadence]

Just an opinion. I'll bet you can get a better interest on a second on the house than a boat loan and better chance of getting it on an older boat.. Then refinance the whole thing into a first mortgage on the home. If in the US with an 800 credit rating or so.

[marlin driver]

There are limitations to the deductibility of interest on a home equity line. If that is a factor for you, check with a CPA/tax preparer for accurate info.

Aside from that, the HELOC is likely to be the easier, less expensive loan. Get quotes on both and you will know for sure.

[SailtheWind]

Originally Posted by marlin driver

There are limitations to the deductibility of interest on a home equity line. If that is a factor for you, check with a CPA/tax preparer for accurate info.

Aside from that, the HELOC is likely to be the easier, less expensive loan. Get quotes on both and you will know for sure.

Good points

[achil]

A home equity loan should be less expensive than a boat loan. However, you are putting your home at risk and if some catastrophe hits you could lose your home. With a loan, the most you could lose is the equity you have in the boat.