Should you really buy a new boat now?

RE: The latest on Marine financing

Marine financing offers excellent rates and terms right now.

Marine financing is a whole different thing than home or auto financing. While it can be similar in some ways, it’s different in others. What’s great about it is the bank uses the boat as collateral and so it leaves your other lines of credit open (Home equity, loans against stock or retirement accounts, business lines of credit, etc.)

First the bank, though a savvy loan broker makes a determination about how much they are willing to lend. If, for instance the best offer you can get decides they are willing to lend $300,000 based on your circumstances, and all you’re asking for is $200,000 they may well allow a rebate to reduce the DP requirement. However, if they determine that they are only willing to lend $200,000 and a 20% or more DP is necessary to cover the purchase cost (say it’s over $250,000), then the rebate doesn’t matter.

Some of their (surprising?) considerations:  (Varies tremendously, not all banks have same or all requirements.)

1. Previous boat experience. It can be minimum, but the more the better and previous ownership a plus—even if a different kind and/or smaller
2. Previous large loan—sometimes a house, but a boat within 50% of the value of what you want to borrow is even better.
3. Liquid—Whether they require a 15% DP or whatever, they want to see that you have 20% in Liquid assets—even though you may not need to use it. In addition, some banks want to see an additional 1 year of payments in Liquid. (Bank accounts, stocks or bonds—generally not longer term investments like real estate. Also, generally not retirement accounts. Though a creative loan broker may suggest cashing in something not so liquid and putting the funds in something liquid for some period of time so it shows up as liquid.) One thought about a rental property: Generally cashing out on a rental home will trigger a tax bite and a boat is not considered a “like kind exchange”. (Real property must be exchanged for real property, or a boat for a boat.) However, the extraordinary tax benefits of Boat-As-A-Business, may still be used to offset the negative tax effects of cashing out Real Property!
4. Own a house. Live in same location for 2 or more years.
5. In the same job or business for 2 or more years.
6. Debt to income ratio below 40% (Including the boat loan)-this automatically takes into account enough income and not too much debt.
7. No bankruptcy in at least last 5 years.
8. Good credit score—really varies from bank to bank. If a bank shotguns your application to a number of banks, just the act of repeated submissions continuously lowers your credit score.
9. Stable—not planning to cash everything in and move on the boat. If you are, get the loan before you sell your home! (Counter intuitive, but true)
10. Personal financial statement that looks good—varies a lot, but assets that approximate the value of the boat—home equity, all investment accounts, rental property, other boats, etc.
11. 2 years of personal tax returns, if self employed, 2 years of business tax returns.
12. There may be additional proofs of accounts, etc. required—varies by individual, wait until your loan broker explains what’s needed.
13. A previous turn down, even one in today’s world, may be deadly!
14. If planning to set up your boat as a business™—it’s essential that you work with a loan broker who has banks that offer this—very, very few do.
15. Newer boats and new boats with warranties and established values are easier to finance than older boats. Custom boats are difficult. Stable, name brands are easier.
16. If you put the boat in an LLC or other entity, it must have the boat as the sole asset, and, if it’s a business, there must be no other unrelated business conducted by the entity. (The bank doesn’t want some other business having trouble taking the boat with it!)
17. Generally, the bank will want the boat C.G. documented (we arrange) so they can record a federal lien (this also has positive implications for you!). By C.G. rules, a foreign national cannot U.S. document a vessel, therefore it’s tough getting U.S. financing for a foreign national. Not impossible, especially if one has a spouse, or a U.S. partner.

 

Not all of this is required every time. The requirements are much harder than a year ago. A good loan broker is essential.

BYA has a dedicated loan broker who is very good—Mark DeLaney, with over 20 years in the industry he has worked, successfully, with us and our Boat-As-A-Business™ program for over 5 years. A good loan broker will:

1. Run your credit once in order to determine which bank is most likely to work for you—so you don’t get a turn-down and don’t have multiple inquiries lowering your credit score.
2. Will have up to 20 or more credit sources, including at least 1-3 that will do a boat-as-a-business.
3. Will analyze your total application and tax returns. Suggest ways to improve your credit score, if necessary. Help, get bad items off, if discovered.
4. Work with you in getting the information needed so he can review it before submitting it to the bank and use this information to optimize your application.
5. Get the correct boat information needed from the dealer. Work with the dealer in determining if rebates will help.
6. If you are setting up a LLC or other entity to put your boat into for liability protection (recommended even if you’re buying a private boat not in a business), set it up in as far in advance as possible so you’re not scrambling at the last minute.
7. Based on the totality of the situation, choose a bank that will stand the maximum chance of giving an approval. From the choices, choose the bank with best terms for the client.

 

For more information, contact us. To get more information and/or submit an application (for a boat you are planning to buy from us), go to: www.bayacht.com/finance.htm

 

Eric Smith

 ~~~~_/)~~~~

410-263-2311 X222 or Cell: 410-703-5655 Skype: bya269

For the latest news, please visit: http://www.bayacht.com/htm

 This paper and any links referred to with it are confidential and intended solely for the use of the organization or individual to whom they are addressed. It is expressly forbidden to retransmit this link without our permission. Opinions, conclusions and other information in this paper should be checked out by the user. Bay Yacht Agency, it's agents or employees or affiliate companies are not responsible for the use made of this information. It is the user's responsibility to verify any information presented by appropriate experts.

 

 

In Annapolis since 1972, still owned and operated by the founder, Eric Smith. We're located on the harbor, in the U.S. Sailing capital, Annapolis. We have helped 1,000's of owners customize their boat to meet their specific requirements. We offer full yard and commissioning services, Sailing courses and charters, financing, insurance and complete services in every category.

 

To meet us any time, including outside of the hours shown, please give us a call at our office anytime.