Boat loan question for newbie

[Madimo]

I am in a similar situation, in that I have a home that I want to sell and use the equity to finance a boat purchase (in the USA).

I am in the personal lending business but not in boat loans so I contacted a loan broker to get some information. I would recommend speaking with a loan broker over talking directly with the bank as you may end up disqualifying yourself if you unintentionally give them information that they don't like. Specifically, if you intend to live aboard and cruise away - something that if shared upfront with the bank may disqualify you from the loan.

Here is what the loan broker told us:
1 - It is difficult (if not near impossible) to get a good loan under the intention of living aboard / cruising. This is mostly due to the fact that you would be literally sailing away with their property making it harder for them to recover if you default on the loan. However, they are not going to check up on you after the loan is closed.

2 - Per above, having a home at the time of purchase isn't necessary, but does help in establishing you in the US making you less of a flight risk. It was generally recommended that we keep the home and sell after purchasing the boat. However, if the home sale is needed to cover some of the upfront costs of purchasing the boat (travel, surveys, downpayment, insurance, etc.) then aim to sell the home at least a few months before the boat purchase and establish a new rental residency (with bills and payments, etc. in your name to that address).

3 - Must be purchased in US 48 (no Hawaii, Alaska, or any of the Caribbean islands). Assume this has to do with the property being more difficult to repo if you miss default.

4 - Must be less than 20 years old. Given this, you may also want to consider your exit strategy in that if you plan to sell in 3-5 years, then you may want to look for a boat that is <15 years old so that when you sell, those seeking to finance are still in your prospective buying pool.

There are of course all the other factors - credit history, score, debt to credit ratio (utilization) and income to debt/credit ratios, liquid cash, etc. but those will all be specific to the bank. Like with any other loan, recommend getting offers from multiple banks, and speak with a broker about your specific situation and they should be able to consult on how to arrange yourself for best chances of approval / lower interest.

[cyan]

Originally Posted by Madimo

I am in a similar situation, in that I have a home that I want to sell and use the equity to finance a boat purchase (in the USA).

I am in the personal lending business but not in boat loans so I contacted a loan broker to get some information. I would recommend speaking with a loan broker over talking directly with the bank as you may end up disqualifying yourself if you unintentionally give them information that they don't like. Specifically, if you intend to live aboard and cruise away - something that if shared upfront with the bank may disqualify you from the loan.

Here is what the loan broker told us:
1 - It is difficult (if not near impossible) to get a good loan under the intention of living aboard / cruising. This is mostly due to the fact that you would be literally sailing away with their property making it harder for them to recover if you default on the loan. However, they are not going to check up on you after the loan is closed.

2 - Per above, having a home at the time of purchase isn't necessary, but does help in establishing you in the US making you less of a flight risk. It was generally recommended that we keep the home and sell after purchasing the boat. However, if the home sale is needed to cover some of the upfront costs of purchasing the boat (travel, surveys, downpayment, insurance, etc.) then aim to sell the home at least a few months before the boat purchase and establish a new rental residency (with bills and payments, etc. in your name to that address).

3 - Must be purchased in US 48 (no Hawaii, Alaska, or any of the Caribbean islands). Assume this has to do with the property being more difficult to repo if you miss default.

4 - Must be less than 20 years old. Given this, you may also want to consider your exit strategy in that if you plan to sell in 3-5 years, then you may want to look for a boat that is <15 years old so that when you sell, those seeking to finance are still in your prospective buying pool.

There are of course all the other factors - credit history, score, debt to credit ratio (utilization) and income to debt/credit ratios, liquid cash, etc. but those will all be specific to the bank. Like with any other loan, recommend getting offers from multiple banks, and speak with a broker about your specific situation and they should be able to consult on how to arrange yourself for best chances of approval / lower interest.

This looks like the most informative reply yet, to the OP's original question.
Thank you, Madimo!

[surf_sail]

Originally Posted by Madimo

I am in a similar situation, in that I have a home that I want to sell and use the equity to finance a boat purchase (in the USA).



I am in the personal lending business but not in boat loans so I contacted a loan broker to get some information. I would recommend speaking with a loan broker over talking directly with the bank as you may end up disqualifying yourself if you unintentionally give them information that they don't like. Specifically, if you intend to live aboard and cruise away - something that if shared upfront with the bank may disqualify you from the loan.



Here is what the loan broker told us:

1 - It is difficult (if not near impossible) to get a good loan under the intention of living aboard / cruising. This is mostly due to the fact that you would be literally sailing away with their property making it harder for them to recover if you default on the loan. However, they are not going to check up on you after the loan is closed.



2 - Per above, having a home at the time of purchase isn't necessary, but does help in establishing you in the US making you less of a flight risk. It was generally recommended that we keep the home and sell after purchasing the boat. However, if the home sale is needed to cover some of the upfront costs of purchasing the boat (travel, surveys, downpayment, insurance, etc.) then aim to sell the home at least a few months before the boat purchase and establish a new rental residency (with bills and payments, etc. in your name to that address).



3 - Must be purchased in US 48 (no Hawaii, Alaska, or any of the Caribbean islands). Assume this has to do with the property being more difficult to repo if you miss default.



4 - Must be less than 20 years old. Given this, you may also want to consider your exit strategy in that if you plan to sell in 3-5 years, then you may want to look for a boat that is <15 years old so that when you sell, those seeking to finance are still in your prospective buying pool.



There are of course all the other factors - credit history, score, debt to credit ratio (utilization) and income to debt/credit ratios, liquid cash, etc. but those will all be specific to the bank. Like with any other loan, recommend getting offers from multiple banks, and speak with a broker about your specific situation and they should be able to consult on how to arrange yourself for best chances of approval / lower interest.

Yes very good information. Thanks.

If you don't mind me asking, if you're thinking about taking a loan for the boat, does that more or less imply you're thinking about cruising for a few years and then going back to work? Or do you want to go indefinitely and hope to figure out how to finance cruising while underway?

[jmschmidt]

No discussion here of insurance coverage. A lender will require a copy of your insurance policy. The insurance policy will state the geographical areas of operation of the vessel and its use, ie. cruising, live-aboard, etc. If there is a claim and the vessel was being operated outside of the stated area and/or being used for a purpose not stated, coverage may be denied. Denied insurance claims will not make your lender happy.

Just like if you have a homeowners policy on your principal residence but you rent it out to go cruising instead of living in it yourself and your tenant burns the place down you can be denied coverage.

[Madimo]

Originally Posted by surf_sail

Yes very good information. Thanks.

If you don't mind me asking, if you're thinking about taking a loan for the boat, does that more or less imply you're thinking about cruising for a few years and then going back to work? Or do you want to go indefinitely and hope to figure out how to finance cruising while underway?

Yes, for us personally, we are planning on a finite period of time and returning to work. This is intended to be a sabbatical or "sea-batical" as others like to joke.

From a budgetary perspective, we are taking all the cash we have and working backwards have set some aside for our return to land (apartment/down payment, few months living expenses, etc.), an emergency fund, 1.5 years of boat living including health and boat insurance, an outfitting and maintenance fund, tax and purchase expenses (surveys, dockage, travel, etc), and what is left is what is what we used to calculate our max loan amount with enough to cover 2 years worth of boat loan payments.

We can/could work remotely while crusing, but don't want to depend on it. Anything we make while crusing will be extra. And plan to return to US with ~6 months of loan reserves remaining to start sale process.

Hope that helps!

[surf_sail]

Originally Posted by Madimo

Yes, for us personally, we are planning on a finite period of time and returning to work. This is intended to be a sabbatical or "sea-batical" as others like to joke.



From a budgetary perspective, we are taking all the cash we have and working backwards have set some aside for our return to land (apartment/down payment, few months living expenses, etc.), an emergency fund, 1.5 years of boat living including health and boat insurance, an outfitting and maintenance fund, tax and purchase expenses (surveys, dockage, travel, etc), and what is left is what is what we used to calculate our max loan amount with enough to cover 2 years worth of boat loan payments.



We can/could work remotely while crusing, but don't want to depend on it. Anything we make while crusing will be extra. And plan to return to US with ~6 months of loan reserves remaining to start sale process.



Hope that helps!

Thanks. I wish you luck. I wonder how hard it will be to return to land after 1.5 yrs