financing a boat, what to expect
I'm not going to lie, I'm biased against and detest our current market system and will rant for hours about it. Those that hold Adam Smith's ideas on a pedestal, I'd ask only this one question: If you were to be diagnosed with cancer would you want a modern doctor to treat you or one from 1776. I'm sure you'd pass on the leaches. And still we apply leaches to economics.
I'm going to try my best to not go David Icke vs Alex Jones nuthatch while writing this and explain how one can get down the financing road with as little discomfort as possible. And I want to make clear that it's the system I dislike not the people in it necessarily.
First and foremost, do everyone including yourself a favor and don't tell them that you're thinking about being a liveaboard. If asked, just say "I hadn't thought about it but that's an interesting idea". Being a liveaboard comes with a bit of cloak and dagger. Marinas, finance companies, the state and some boat owners frown upon it. All at varying levels. It's completely understandable too. One yard gnome hording liveaboard that has let their boat turn into a barge can bring the value of the marina down significantly and deter new slip holders from signing up because of the trashy vibe it puts out. So, instead of screening possible liveaboards, marinas go the easy route by choosing to not deal with it and institute a "no liveaboard" policy. Banks and government types don't like it because its hard to pin you down for taxes and plus the off chance you'll run if you can't pay your bills. What's interesting though is that they're all intrigued with the liveaboard lifestyle. Maybe its got a roguish aire about it, or I like to think it does. But, all of them will happily talk to you about what it's like and how you do it. And here's a little secret: almost every marina that has a no liveaboard policy is guaranteed to have at least one liveaboard.
On to bank's requirements and what to expect. At a minimum they will expect a down payment equal to 10% of the purchase price of your boat of choice. Sometimes, you can get them to include the money that you spent on the survey as part of the down payment but don't count on this. Expect to provide a bank statement to validate that you have this down payment. Most boat loan applications will look like a mesh of auto and home with the addition of a net worth statement. The net worth statement might not be a form that you're used to seeing. Its a balance sheet showing the value of the things you own vs the money you owe. The bank will likely require a positive net worth close to the amount of the boat loan. In most cases the loan officer won't have the time or means to research the values of the property you own. So, being generous in this area can be helpful. Don't sell yourself short but don't go overboard. Use a strong market values and remember that values are always "subjective". It's important to not forget items of value that you've long since paid off. Like machinery, tools, gold or silver, art, antiques, collectibles, and so on. Include any 401ks, CDs, life insurance policies, rental income, bonds, bank accounts, etc . Money owed will be cut and dry because it's on your credit report. So, include what can be validated. Honestly, even outside of getting a loan, a net worth statement is a good way to judge your financial situation and ability to handle a boat. Your net worth factored with your credit rating and income will be the deciding factors on a loan. That information will go toward deciding the loan amount, rate, term and down payment requirement. Bummer is; You won't really know these key factors until you apply.
Applying for a boat loan can be damaging if not handled properly. Going to an online loan clearing house like Lending Tree or eLoan is like using a shotgun for brain surgery. Not great. I recommend Trident Funding. I'm not shilling for them either. Ryan Beldham saved us after I'd signed up with the one of these loan meat grinders. He answered all my little nagging questions with a smile. Even left breakfast with his mother to meet us at the boat for a quick viewing. Truly amazing, he knows the business like a champ. You can throw different funding scenarios at him before committing and he'll be straight up with you. He hooked us up with Kyle Warren at Off the Hook yacht sales. Who located several boats for us based on our criteria. Some before they even hit the market. In addition, he traveled to both the surveys that we had done. Even the one that was three states away from his home base. (Please don't judge these guys on anything I say in this column. They're both stalwart upstanding members of their profession and might not 100% agree with my statements in this article.)
Not all boats can be financed. The majority of banks out there won't touch a wood hulled boat. One, it's probably up there in age and two, it's prone to rot and three most boatyards won't haul it out for inspection for fear of the hull collapsing. Another untouchable is any pleasure boat under $10000. I believe this is a law but don't quote me. There is a way around this however. For any "project" boat up to $25000 that you may want to take a shot at living aboard on go to Prosper.com. It's a crowd funded loan site for personal loans. They rate credit a little different but usually in your favor. You'll be asked to tell them what the money is for. Do not tell them it's for a boat. Pick any other choice that does not involve a title. It's not trickery, they just can't issue loans on titled purchases. They don't really care what you use the cash for. I think one of the choices is "vacation". Following value is the age of the boat. Loan terms and amounts will diminish the older the boat is. The prime terms usually start to drop out at around 17 years of model year age. Sometimes they'll consider older boats but it's usually only high market value boats like a Hatteras, Weaver or Egg Harbor. Quick build production line boats like a SeaRay, Bayliner, or Wellcraft won't make the cut. Not to sour anyone by saying that one is better than another but that the market dictates this and usually along those lines. The survey can sink a boat too. You'll probably get an approval pending a survey. If the survey turns up serious problems like structural or complete engine failure the bank is going to tell you no thanks. I'd recommend going along with this even though you'll be out the cost of the survey. Problems big enough to scare the bank off should scare you off. And be happy that you got out for just the price of the survey.
Once you get approval, you'll be moving on to the survey and then renegotiation. I'll be covering that in another article. Hopefully, I answered some of your questions. If not please leave a comment and I'll try to help out. Also, if this or any of our articles helped you out please visit our Improbable Fund Page to buy us a drink. It will help us keep lifesaport going.
Cheers,
Mike
Life's a port
