Sail Cruising - Finance or Own Boat?

[cvick76]

My wife and I are considering purchasing a sailboat and cruising the Caribbean for several years then possibly on to a pacific crossing and further. We are pricing boats in the $150K-$200K range. We are planning to sell everything at some point which will leave us roughly $350-400k to purchase the boat and fund this lengthy excursion. We are interested to know if fulltime cruisers are financing their boats in this situation. While we could pay in full, it would obviously leave us more cash by financing. The biggest downfall being the continued monthly payments vs. no payments. Would the interest rates eat us up? In addition, do lenders require cruisers insurance? We are just trying to get a feel for the way it is most often done when working on a modest budget.
Thanks,
Vick

[s/v Moondancer]

Pay cash, insure the boat, keep a third of the boat value for long term repairs and upgrades.

What if? The engine blows, the mast falls down, the sails blow out in a storm, one of you gets injured or sick?

Just as we expected, this lifestyle is far more expensive than most people expect...labor rates are $50 to $85 in the Caribbean.

Good luck we are 6-7 years ahead of you and cross the Pacific next Spring.

[boatman61]

Financing your boat is going to set serious restrictions on your cruising range... lets face it... whats to stop you just disappearing over the horizon... and the way I see it... better to downsize in years etc the DB than put yourself in hock for something an insurance company may well refuse to pay out on in full... they will also place limits on your cruising ground...
Go Cash... you know it makes sense..

[cvick76]

Thanks for your prompt responses. It only made sense to own, however, I was curious if for some reason some long term cruisers were financing. Now that we have cleared this, what about insurance? None, liability or maximum attainable?

Much thanks for your insight guys.

Vick

[s/v Moondancer]

You insure what you cannot afford to loose. Without insurance the loss of the boat would mean an end to our cruising life...

We use "Jackline" through IMIS, they are not the cheapest but they are not based in the Ukraine or Marrakesh as two lower priced company were!

[rw58ph]

I would finance the boat first as banks/finance have preferred list of surveyors, will let you know that they value and willing to finance on the boat, give you a change to see if being a live aboard is for you, sand when the house sells and you know for sure you can pay off the loan. Banks/finance are good resources and they will not let you go to far wrong. We first fiancé the Eagle as we knew we would invest about 50 grand into the boat to make it live aboard ready and we like being a live aboard. When the house sold we then paid off the loan.

Being a live a board is more expensive than most people think, and as mentioned before you need a reserve/saving.

[Stu Jackson]

rw's points are well taken IF the loan doesn't have a prepayment penalty. If you still have to pay ALL the interest on the loan in his time frame concept, you end up paying MORE for the boat than if you paid cash. Depending on the interest rate, only YOU can figure out what that will be.

Given that, we bought our boat in 1998, financed 15 year. When we refied our house only a few years later, we paid off the boat with that. In our case, we were only talking a less than $50K loan to begin with.

So, find out if you can prepay any balance without interest. That's what we did.

[cvick76]

Thanks for the responses guys. Sounds like provided there is not a penalty for early payoff financing up front might not be a bad option. Then once "all my ducks in row" ie house sold, cars etc.. then pay the remaining balance off prior to setting off. Any other cruisers insurance recommended?

Thanks,

Vick

[pathlesschosen]

My opinion, pay cash for a long term cruising plan. For a one or two year cruise some finance knowing they have to sell at the end.

[valhalla360]

Pay cash and get a surveyor. Let the surveyor know you want to know whats up with the boat not just trying to get the bank to sign off. No reason to pay the bank a few thousand dollars for what you can do yourself (plus the bank will make you pay for a survey anyway).

Do you really want to be anchored off a deserted island trying to figure out if your payment cleared?

Given that you are asking the question, I assume you aren't a multi-millionaire who can self insure thru the loss of a $150k boat, so get insurance and make sure to let them know where you will be cruising (most local insurance limits off shore cruising).

[David_Old_Jersey]

Originally Posted by valhalla360

(most local insurance limits off shore cruising).

and usually include crewing requirements for longer passages - just because they bank your cheque does not mean you are always covered!

In regard to finance or not - whilst a majority (including me) would be horrified to set sail with an IOU hanging around necks, nonetheless IMO it is an entirely personal thing depending both on own personal viewpoint (some simply more comfortable with debt) and the numbers - plus the degree of risk willing and able to take (risk on both options).

Boats is all about choices . The great thing is that a lot more of them are your own when afloat - the price of that is you have to work the answers out for self (for some that is fun, for others not so much)....and you get to live with own choices, whether good ones or not!

[Rlrsalem]

Whoa, slowdown and give us your boating history. Have you much experience or novice. Is this a bucket list or have you built up your skills to the point you wish to expand?
Many wish to get Rv's and travel the globe. How's the health or you and your family? I'm guessing that you have a solid pension and have a back up plan in the event you wish to trade in your boat for a home.
When I was just a young fellow my Mom's best friend purchased a Motor Home. She didn't live long enough to complete the last payment. This always stuck in my mind. We just don't know what awaits us.
Best Wishes

[gabilo]

Originally Posted by Rlrsalem

Whoa, slowdown and give us your boating history. Have you much experience or novice. Is this a bucket list or have you built up your skills to the point you wish to expand?
Many wish to get Rv's and travel the globe. How's the health or you and your family? I'm guessing that you have a solid pension and have a back up plan in the event you wish to trade in your boat for a home.
When I was just a young fellow my Mom's best friend purchased a Motor Home. She didn't live long enough to complete the last payment. This always stuck in my mind. We just don't know what awaits us.
Best Wishes

What does his boating history have to do with his posting? Where is he going to fast and need to slowdown?
He asked 2 questions and supplied the forum with basic background info related to his questions.

[belizesailor]

My 2c, a boat is guaranteed to be one of the worst financial decisions you will ever make, why make it worse by incurring financing costs...and the likely requirements/restrictions your lender will require.

[gabilo]

Originally Posted by Rlrsalem

Whoa, slowdown and give us your boating history. Have you much experience or novice. Is this a bucket list or have you built up your skills to the point you wish to expand?
Many wish to get Rv's and travel the globe. How's the health or you and your family? I'm guessing that you have a solid pension and have a back up plan in the event you wish to trade in your boat for a home.
When I was just a young fellow my Mom's best friend purchased a Motor Home. She didn't live long enough to complete the last payment. This always stuck in my mind. We just don't know what awaits us.
Best Wishes

Why does the OP need to provide his boating history or need to slowdown? He asked 2 reasonable questions and received a number of replies from the community. The ones who will ask him about his boating history might be his insurance company.
He is planning to set off in a few years, surely he feels today healthy enough to do so. How his or our health will be in a few years we all don't know.