Quote:
Originally Posted by Amapola
A financial planner once told me that you should never finance a boat because they don't appreciate...and, if you can't afford to watch her sink, you can't afford a boat.
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That kind of financial planner sounds like one taught within the industry selling insurance, annituties and
retirement plans.
There is nothing wrong with leveraging your financial position so long as you keep it within your means and can hedge against financial losses. A house may go down in markey value, but it's functional value remains to the owner. Keep making the payments for the function it provides and later the market value will likely return.
A boat, most boats do not appreciate in value, so what? It's the cost of
ownership and your payments should reflect that meaning your payments should be enough to keep your liability less than the value of the item financed. Making an additional payment to principle will do that.
This is always a "use of funds" question and an additional payment may not be the best use of your
money. Alternative investments may be a better soultion and allowing some of the "profits" gained to be reduced by the depreciation of other assets while keeping them. This will keep your
head above
water too. Few assets appreciate, most are consumed and you need to consider the
consumption as part of the cost of
ownership.
I have never heard of anyone getting ahead by
buying a new car or other toy. I have heard of many people buying an older toy, making the necessary
repairs and improvements and making
money for the efforts, like a house flipper, you could be a boat flipper! Unless you're really a pro and know the market I would not suggest flipping boats, I'd think it would be worse than real estate. But you might break even or do a little better.
Interest is deductable if you itemize as a second home, but that may change soon.
I know a guy who bought houses using credit cards (bad idea for most everyone BTW) but he would load up a card (has several) and then transfer the balances to low interest offerings or even no interest new cards for awhile. This might help in a short term, like to make the
sale, but never finance long term assets or holdings with short term financing as those loans can come due and if you can't refinance it, you lose it.
X2 on using a credit union. Other sources might be cash value life insurance policies, borrow it and forget it so long as you have enough of it. Refinance the home, I'd suggest not taking out a second where rates are today. Other assets, like a car or RV might be easier for most lenders to jump on. Another option is get the seller to finance the boat, but do not overpay for the boat for the right to finance it or pay a higher rate than the real costs of financing elsewhere. There are advantages to the seller financing the deal, any gain on the
sale (I know, not likely but could be if it was in a business name) will be amortized and the interest is interest
income, taxed at a lower rate....which means the sale
price could be less and carry it at a higher interest rate. If you have other assets, consider pledging those instead of making a large down payment if your cash is better off doing something else.
I kinda agree with the watching it sink statement. If it's something you can't afford to watch sink in the
water, get it insured, if it's something you can't afford to watch in value, you can't afford a boat, because the value will most likely sink. Grin and bear it! Good luck...
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