Borrowing from Life Insurance for purchase

[S/V Illusion]

Originally Posted by poseidon2027

"This all sounds more like a wild scheme to fund a dream without any practical forethought."

Pot calling the kettle black or something something or other.....Investment banker equals personal finance it does not.

Point is, I thought CF had more financially savvy people who have built up generous nest eggs and can afford more expensive hobbies like cruising, boating etc. Guess I was wrong. I went to a finance forum and got all the answers I needed without the "if you cant pay cash you cant afford it" dribble that most here said.

You came here to solicit advice. Having received advice with which you disagreed from well-meaning and experienced people, calling it “dribble”, you have a tantrum and imply we don’t know and you were wrong to ask. Subsequently, some other internet source told you what you wanted to hear.

Bye!

[Coach Shoe]

I'd be willing to bet that the OP's dream never makes it to launch.

[MJH]

Originally Posted by poseidon2027

I know my title says borrowing from life insurance but this may be more about the generalities of acquiring the funds for a catamaran purchase. I was just wondering what some options are that people use for getting the monies. For examples, the Wynn's (from Gone with the Wyn) said they borrowed from their life insurance policy. Im really hoping someone could shed some light on this as I had never heard of doing this before.

Then, Seth from the Sailing Family, said he borrowed against his portfolio. I've done a little research into this and am also looking at this option.

Finally, I found a little information on a boat loan. This seems like the worst ides because of interest rates.

So basically, I was just hoping you more experience sailors could give me a little information on borrowing from life insurance or other ideas I may not know about. Thanks for all the help!

NEVER FINANCE A DEPRECIATING ASSET...BOATS DEPRECIATE!

Initiate a boat investment fund and religiously add to it monthly while you spend quality time planning what you want to do with this boat, researching the type of boat you wish to buy that aligns with your goal, how you will outfit it, how you will insure it, where you will keep it, and how you will support the ongoing maintenance of it. Now project that forward to the time frame you are considering.

Some quick number scribbling on paper will tell you approximately what you can afford. Begin viewing all the boats that you can afford and see as many as you can until you are sick of looking...then look some more. You will eventually find the boat that affordably fills your dreams.

Good Luck.

~ ~ _/) ~ ~ MJH

[goboatingnow]

Originally Posted by MJH

NEVER FINANCE A DEPRECIATING ASSET...BOATS DEPRECIATE!

Initiate a boat investment fund and religiously add to it monthly while you spend quality time planning what you want to do with this boat, researching the type of boat you wish to buy that aligns with your goal, how you will outfit it, how you will insure it, where you will keep it, and how you will support the ongoing maintenance of it. Now project that forward to the time frame you are considering.

Some quick number scribbling on paper will tell you approximately what you can afford. Begin viewing all the boats that you can afford and see as many as you can until you are sick of looking...then look some more. You will eventually find the boat that affordably fills your dreams.

Good Luck.

~ ~ _/) ~ ~ MJH

Sorry mate that’s just nonsense advice. Borrowing make sense in lots of circumstances , it all depends. At the end of day all you are doing is financing the depreciation , same for cars or RVs etc.

Foolish borrowing is like all foolish activities , but sensible borrowing can make sense. At times I had plenty of disposable income , but it would have taken me 10 years to save the capital , it make perfect sense to borrow rates were low , my income was stable and predictable and my ownership term was less then 5 years. In the end all I was doing was financing the depreciation

[MJH]

Originally Posted by goboatingnow

Sorry mate that’s just nonsense advice. Borrowing make sense in lots of circumstances , it all depends. At the end of day all you are doing is financing the depreciation , same for cars or RVs etc.

Foolish borrowing is like all foolish activities , but sensible borrowing can make sense. At times I had plenty of disposable income , but it would have taken me 10 years to save the capital , it make perfect sense to borrow rates were low , my income was stable and predictable and my ownership term was less then 5 years. In the end all I was doing was financing the depreciation

All boat owners experience depreciation. Add financing to that and you are paying once again (now twice) beyond the capital cost of the boat. The up side is that you have it now and probably more boat than you could otherwise buy. It doesn't make much sense with cars and RVs either. Everybody doing it doesn't make it a wise thing to do but it makes boat dealers and financing companies happy.

~ ~ _/) ~ ~ MJH

[goboatingnow]

Originally Posted by MJH

All boat owners experience depreciation. Add financing to that and you are paying once again (now twice) beyond the capital cost of the boat. The up side is that you have it now and probably more boat than you could otherwise buy. It doesn't make much sense with cars and RVs either. Everybody doing it doesn't make it a wise thing to do but it makes boat dealers and financing companies happy.

~ ~ _/) ~ ~ MJH

Somebody with sufficient income , it’s simply about the cost of ones pleasure, you are not paying “ twice “ , you are paying the interest rate of the loan over the period , that’s simply the “ cost “ of whatever you are buying.

Saving the money may not be sensible , say you want your kids to experience sailing , you can do it now via borrowing or wait till they are 20 and you’ve saved the capital !! ( hopefully boat price inflation turn out to be less then the loan cost over the period !!!)

Borrowing is simply a cost , if you can handle that cost , that’s fine . It’s no more then buying a boat , you have to stomach the buying price one way or the other

I never said borrowing is “ wise “ for everyone , but neither is the blanket advice that borrowing for a wasting asset is bad.

[conchaway]

" If you have nothing, and you borrow; you have LESS THAN NOTHING".

[Kd9truck]

Not a peep out of members that have taken loans to buy a boat. No advice on a free advice forum….tells you something, no?

[Ballsnall]

Originally Posted by flightlead404

If you can't pay cash for your toys you can't afford them.

What a quaint idea.

[sailingharry]

I have no direct experience, because I don't hit any of these roadblocks. BUT, to OP, carefully research these questions. It would suck to find out that these are speed bumps:

* Will insurance companies insure you with a boat of this size/value, and your sailing resume? Will you be required to hire a paid captain for training? Remember, any loan will likely require acceptable insurance.
* Are you able to find insurance for the areas you intend to cruise? Insurance in the US is generally available -- insurance outside the US gets more challenging.
* Does your lender/loan source have any restrictions on leaving the US with their collateral?

We paid cash for our retirement boat, we have extensive coastal and offshore experience, and we currently limit our cruising areas to US and Canada, so we haven't had these issues. We have pondered dropping hull coverage and self insuring, and would consider it more seriously if we leave the US -- being a paid-for boat that we could (painfully!) afford to lose, the option is at least an option. But I've heard "friend of a friend" horror stories on all these issues.

[poseidon2027]

Originally Posted by Kd9truck

If you received an answer from another source that makes sense to you “good on ya mate”.
Why don’t you share it mate?

You came to this forum it I’d not solicit you

The “dribble” posters have vessels or are saving to buy the ones they can afford.

I have a beautiful 12 year old 44 S/V ft that is completely paid for, my annual expenses are upgrades and more importantly upkeep. None of my investments are tied to another. I pay no interest on borrowing anything my credit card balance is zero, I am 57 and have been “retired” for 5 years, all my investments, all untethered and earning. I am also saving every month, yes saving for retirement in retirement.

What am I doing wrong?

My nest-egg is flush “Poseidon” but please elaborate on this advice you got from the finance forum? I am legitimately intrigued.

I accumulated the above by working hard (blue collar ) it’s the only way I could guarantee my dream to reality, I bet against myself. It’s the only way this dribbler could realize my dream, sometimes, most times it sucked, grinding away days, weeks, years, on end. I did not have access to a finance forum Back in my teens and twenties when I pondered past my working life at retirement, I reluctantly bought that BS I was sold by the dribblers.

I am sorry the advice you asked and the answers you received insulted you.

I truly hope your dream with your family comes true, get term life insurance it’s untaxed on payout.

Fair winds mate.

Thats great that you were able to achieve your dreams on your terms. I truly am happy you are able to do this the "blue collar" way that works for you.

But most of the replies I have received have been dribble. I made it painfully obvious, various times, I could easily sell assets to get the remaining cash. I was just looking for savvy ways to use good debt, or find ways to keep my money invested instead of cashing it out. I just dont think the people here are the type who know these types of answers. I would much rather have received an answer like that then "If you can't pay cash for your toys you can't afford them." That is simply not true and shows a lack of financial education.

Originally Posted by S/V Illusion

You came here to solicit advice. Having received advice with which you disagreed from well-meaning and experienced people, calling it “dribble”, you have a tantrum and imply we don’t know and you were wrong to ask. Subsequently, some other internet source told you what you wanted to hear.

Bye!

LOL, ok you were literally the first one to insult, then you throw a tantrum because I disagreed and yes I sent an insult back. If you cant take it, dont dish it.

Bye.

Originally Posted by Coach Shoe

I'd be willing to bet that the OP's dream never makes it to launch.

Not sure why you made this statement. Has nothing to do with my question. You know nothing about my finances and even less about me. Don't hate for the sake of hating.

Originally Posted by Kd9truck

Not a peep out of members that have taken loans to buy a boat. No advice on a free advice forum….tells you something, no?

You are correct. And looking at the replies I have received, it is no wonder there is another thread going around about how bad the people here at CF are. It truly is amazing just how mean and unwelcoming people are here.

Originally Posted by sailingharry

I have no direct experience, because I don't hit any of these roadblocks. BUT, to OP, carefully research these questions. It would suck to find out that these are speed bumps:

* Will insurance companies insure you with a boat of this size/value, and your sailing resume? Will you be required to hire a paid captain for training? Remember, any loan will likely require acceptable insurance.
* Are you able to find insurance for the areas you intend to cruise? Insurance in the US is generally available -- insurance outside the US gets more challenging.
* Does your lender/loan source have any restrictions on leaving the US with their collateral?

We paid cash for our retirement boat, we have extensive coastal and offshore experience, and we currently limit our cruising areas to US and Canada, so we haven't had these issues. We have pondered dropping hull coverage and self insuring, and would consider it more seriously if we leave the US -- being a paid-for boat that we could (painfully!) afford to lose, the option is at least an option. But I've heard "friend of a friend" horror stories on all these issues.

Thanks for the reply. To try to answer all your questions at once, I can only say that I have to wait a little longer to get a final answers on those. With my timeline still so far out, 6-7 years, from my understanding insurance requirements, restrictions etc. change frequently. If I were to do this today, I would definitely hire a skipper to ensure I meet all the necessary requirements for insurance. But again, these are problems for the future. What I am doing now is making sure the funds are there in 6-7 years, then as I get closer to purchasing the boat, thats when the insurance stuff will be more important. Correct me if I am wrong of course. Thanks!

[captlloyd]

Originally Posted by sesmith

Not sure what boat you're considering but buy 20-40% less boat, then you won't have a cash problem, from what I'm reading.

That said, paying cash for something like a boat makes the most sense financially (this really is finance 101). To do that, the cash must come from savings that you don't need. That's your problem in a nutshell.

Financing works great if you have an investment to borrow against that makes more than the interest charged for the loan. I've done that with our last 3 cars and still have the original amount. Last car financed was at 0% with no incentive to pay cash, so a no-brainer of a loan. Still paid half of it up front with cash from the sale of the previous car. It's doubtful you will find a loan for a boat that has a low enough interest rate to make this an option, though. Financing play toys makes terrible financial sense but lots of people do it.



On renting out your home. I did that for 5 years. I saved all the rent for repairs and work on the house as we planned on moving into it after that 5 year period. The mortgage and taxes came out of my pocket for that period. We moved down and found the last renter trashed the place (and I did have a property manager). Cost me way more than I saved to remodel (and I did the work myself). I'll never rent out another house again. Don't know how people come out ahead or even break even on rentals.

Bought a house to rehab in a low rent district, have about $20,000 in the house. That was 30+ years ago, I have cleared $80,000 in rent over that time. Still have the house, still collect rent. Yes, you can make a lot of money in house rentals but you have to have the right mindset.

[sailingharry]

Originally Posted by captlloyd

Bought a house to rehab in a low rent district, have about $20,000 in the house. That was 30+ years ago, I have cleared $80,000 in rent over that time. Still have the house, still collect rent. Yes, you can make a lot of money in house rentals but you have to have the right mindset.

I have a VERY generalized rule on renting houses. "Don't rent a house you would live in." VERY generalized, I know.



But the theory is that the house I live in has walls, floors, trim, details, etc all in good condition (no, not "mansion" -- I live in a 1967 tract rancher that is mostly original). A renter drags something across the hard wood floors, and there is a gouge that is not repairable at anything approaching a reasonable cost. My wife had a very nice townhome, the renter's puppy ate the varnished banister spindles, repairs would have been way above any security deposit (which went to pay overdue rent...). She had it wood-puttied up and painted, at a huge reduction in "wow" factor when she went to sell it. Same issues for a burn mark on a kitchen counter, etc, etc.



On the other hand, the rental unit I bought and rented out for a few years was 100 years old, had been converted from a single house to a two unit apartment, had horrible discontinuities in finishes, etc -- and when a tenant screwed something up, some spackle and a coat of paint made it as good as it was before.

[sailingharry]

Originally Posted by poseidon2027

Thanks for the reply. To try to answer all your questions at once, I can only say that I have to wait a little longer to get a final answers on those. With my timeline still so far out, 6-7 years, from my understanding insurance requirements, restrictions etc. change frequently. If I were to do this today, I would definitely hire a skipper to ensure I meet all the necessary requirements for insurance. But again, these are problems for the future. What I am doing now is making sure the funds are there in 6-7 years, then as I get closer to purchasing the boat, thats when the insurance stuff will be more important. Correct me if I am wrong of course. Thanks!

Yes, things change. But look closely at what lenders require. Your plan is based on a "loan" (in quotes, because you are looking at various approaches), and if the going consensus now is that boats with loans have issues in international travel, that factors significantly into your plan. A friend of a friend, and so my details are sketchy, had issues on this. I think he ended up financing the boat long enough to sell his house, and then paying off the loan in order to head out across the Pacific. It would be a bad turn of events if you found out, right about the time of purchase, that the lender won't let you leave the country, or requires you to have a full time captain for the first 6 months, or some such detail. Of course, some "loans" (a HELOC -- if you can find one these days -- or an investment backed loan, etc) may not care at all what the loan is used for, as the collateral is firmly anchored in the USA.

[captlloyd]

Originally Posted by sailingharry

I have a VERY generalized rule on renting houses. "Don't rent a house you would live in." VERY generalized, I know.



But the theory is that the house I live in has walls, floors, trim, details, etc all in good condition (no, not "mansion" -- I live in a 1967 tract rancher that is mostly original). A renter drags something across the hard wood floors, and there is a gouge that is not repairable at anything approaching a reasonable cost. My wife had a very nice townhome, the renter's puppy ate the varnished banister spindles, repairs would have been way above any security deposit (which went to pay overdue rent...). She had it wood-puttied up and painted, at a huge reduction in "wow" factor when she went to sell it. Same issues for a burn mark on a kitchen counter, etc, etc.



On the other hand, the rental unit I bought and rented out for a few years was 100 years old, had been converted from a single house to a two unit apartment, had horrible discontinuities in finishes, etc -- and when a tenant screwed something up, some spackle and a coat of paint made it as good as it was before.

That’s how you do it !