My late father had an opinion about bankers:"They will happily loan you money, to buy an umbrella, on a sunny day. Be sure they will want the money back on the next rainy day" 'Bout sums them up I'd say!
Thanks for sharing this very stressful process. All the info was very useful information for those of us thinking about buying a boat. Be safe, we wish you fair winds and following seas...
Good info and advice. I didn't buy a big boat. I got a 20 year loan on a cutwater 26, which is more of a family day boat to us. I was turned down on the first app, but then approved by M&T.
You are very well spoken! Excellent use of graphic overlay. We appreciate this information, I'm going to follow you! We are on our own journey towards a catamaran. Chartering a FP next month in the virgin islands - cant' wait!
Funny you mentioned that they won't lend to live aboards, the same thing with RV's. Even though we owned our house in Oregon but having to take work in Nashville, it didn't make sense to buy a house in Nashville and elected to full time. We did need a bigger rig for full time but they wouldn't lend to us and we have a credit rating of over 800. The next RV, we were aware of that. USAA googled the address we were staying and called saying that we were staying at a campground and whether we were full timing, I said hell no, we were staying there while we looked for a house, the loan was approved 5 minutes later.
Yes. Unfortunately, you have to bend some truths to get through approvals. We considered things we could do to obscure what we hoped to do but in the end decided to just be who we are and let the chips fall.
Much appreciated for sharing your experience. I am slowly working my way through the catamaran purchasing process. I found USAA to have a straight forward process without quite the stipulations you have experienced. Sadly the Cat I wanted was damaged in Idalia, so back to shopping.
That's very interesting. We are USAA members and looked at them. They did not seem able to loan the amount we were requesting which was similar to the amount shown in the video. Thanks for letting us and everyone know. Maybe they are opening up a little.
I'm glad you mentioned insurance. My father purchased a blue water ketch. All cash for the reasons you mentioned. He had gotten as far as the USVIs when he was hit by a hurricane. The boat broke the mooring after two other boats locked together hit him. All three went to the beach. 😢. The insurance company refused to cover him because of location. The local insurance went bankrupt because of huge losses so even if he'd had supplemental policy that would have not paid either.
This is one of the very difficult things. Banks don't want to loan to liveaboards and in fairness, it's probably because insurance companies don't want to cover liveaboards. We opted for liability only because, even if we said the magic things to get insurance, our claim would probably be denied after they discovered how much we're on the boat and that we don't have a real home port.
These were my thoughts exactly, in our case. A friend of ours anchored next to us in The Bahamas just took a lightening strike. They were fully insured in Canada but the insurance company said their deductible would be $15,000 because they were not in Canada when it happened. It's NOT friendly to liveaboards and travelers. However, other comment on this video spoke about their uninsured father losing the boat to a hurricane. It was on a mooring. I have a hard time taking how an unmanned boat is less at risk than a boat that has an owner on board 24x7x365. If a hurricane is coming our way, we leave. We're NEVER going to ride one out. We're always with the boat. Just move it. These things don't sneak up on you.
@@BFSailing I was during Hurricane Hugo. He knew the storm was coming and secured the best anchorage available. He rode out the storm on the boat doing his best to save her. After the boat broke loose they were driven to the beach. He spent the night inside the boat while it was pounded by the storm. This was not a matter of seamanship or lack of effort. My point was as a live an aboard it is very difficult to secure adequate insurance. Even if he had purchased local insurance in the USVI he would not have received a settlement. The devastation was so great that the local insurance companies went bankrupt not paying any of the claims.
@@peteharper3614 Peter, If he was aboard and road it out, I'm glad he's safe. I was not implying poor seamanship or lack of experience or any superior experience on my part with my observation. I was trying to emphasize what you have confirmed in that the insurance companies often end up not paying or invoking some misunderstood clause due to the complexity of the policies and their restrictiveness. It's unfortunate that the insurance company bankrupted. There needs to be some kind of insurance for insurance. FDIC insures a bank losing your money. There should be a guarantee when an insurance company promises to cover you and they don't. I was also commenting on the negative look insurance companies have on live aboard owners. Even though he was on the boat and trying to save it (again - no inference of incompetence implied in any way) he probably didn't have the ability to run from the storm. He probably didn't have 3 weeks of time available where he could have made the decision to leave the area a week ahead of time, wait the storm out in some other locations, and then use another week to bring the boat back home. That's not a realistic hurricane plan for owners who are not in a position to stay on their boat full time. Also, I bet many other boats were destroyed where the owners were NOT on board and able to try to save the boat. Boats that are owned by non live aboard sailors are often left in the path of the storms and the owner is not there. His presence was probably the rare situation. Usually, only people who live on their boat have the ability move it out of the way of destruction. What I was speaking to was that the insurance company's actuary calculations predict that there is GREATER risk when someone lives aboard a boat but I'm not seeing how there is greater risk. It seems short sighted to me.
Over here in The Netherlands, the mortgages on (Sail- and Motor-) boats ended beginning 2000's and loans for (Sail- and Motor-) boats are hardly approved. So, one need cash to buy a boat and man do we have marina's full of boats hardly moving out their berth...
I couldn't agree more with the buy now and what you can afford. Paying cash is generally always better if possible. I would however say that the one type of loan that might make sense for the few people that have this available to them is a whole life insurance loan.
Terrific video. Really helpful. The finance credit business just seems so strange. It's like a series of secret steps they want you to take but they'll never tell you upfront what they are. You lay out exactly what is required before someone should even apply for a boat loan. When I put a deposit on a boat I was introduced to a loan person. She told me two things, 'Well, not right now...." And "You should be thinking about your next boat because on average people change boats every 4 and a third years." We won't loan you the money for this boat, but we want you to be thinking about the next one.... What was the point? She could've simply told me what's in your video. I'd have said, "Oh, okay let me do all that and then apply for the loan." I guess they gain somehow by having a stack of applications. I was looking for a starter/training boat, found a much nicer one, bluewater ready, had already been to New Zealand and back. Overpaid a bit (cash), cancelled the new boat. Now I have a nice boat, not as nice as the one.... but no boat payment.
Yeah, I'd never buy a 500k boat unless I had about four times that in the bank. Which personally, mean's if I ever get a boat I'm probably looking at around a 50k boat.
According to IRC section 163(h) (4), a boat will be considered a qualified residence if it is one of the two residences chosen by the taxpayer for purposes of deductibility in the tax year. A qualified residence must have basic living accommodations including sleeping space (berth), a toilet (head), and cooking facilities (galley). If the boat is also chartered, the taxpayer will have to use the boat for personal purposes for either more than 14 days or 10% of the number of days during the year the boat was actually rented, to qualify for the interest deduction in accordance with IRC section 280A(d)(1).
@@BFSailing Thanks for that, I retire at 60 in 8 years. Plan is to refresh my sailing skills this summer with some lessons, then charter day trips on a mono for a couple of years. If that sticks may buy a mono. If that sticks will take captain lessons in the bahamas and then on retirement get serious about a Cat. Baby steps tho...
Whelp! The credit business puts me out. I have no credit because I own everything I possess. House and cars and no loans. The debt ratio boondoggle is such a scam. Save and invest well!
Borrowing to buy a used boat with a term more than 5 years doesn’t make much sense if you have no other assets, IMHO. If I bought a boat as a live aboard & I wanted to keep my home, I might borrow up to 50% of my home’s FMV with a term of no more than 10 years & rent it out as long as the rent net of tax covered the loan payments & realty taxes. With the proceeds of the loan, I’d allocate no more than 60% to the purchase & 40% to fund refits & repairs. So, on a $500k boat, I’d need $350k cash & a $250k loan - 150K towards purchase & $100k for refits & repairs. Then I’d want my after tax income to cover the $4-6k per month I budgeted to sail.
I was trying to figure it out too. I plan on turning my home property into rental property but finance a boat while I'm still home and working so I can get a good lender and stuff. I have one rental property now and with my retirement and property I should bring home around 10k a month after taxes. Looking at trying to get a 46ft monohaul so we shall see.
Sometimes people borrow money to cover a gap in time until they can access other funds, like retirement or other forms of income. Just because you take a 20 year loan does not mean you keep the 20 year loan for 20 years but you might benefit in the short term from paying a lower payment.
Thank you for the heads up. I have already started getting rid of my credit cards debt. I went from $23,000 to $829. FICO was 524 to 837. I also paid off my house and old car. College loan gone 35 years ago.
There is no better way to throw away money than by buying things that you can't afford with money that you don't have. If you're going to work for a bank, you are far better off being behind the counter than you are in front of it.
Hi, I have a question: If one pays cash outright for a boat, can they get liability insurance instead of full coverage insurance; similar to a car? Meaning, the insurance company is not responsible for repair and/or replacement of your boat. The liability insurance is only for damage to property of others if your boat should damage someone's property. By the way, thanks for posting your experience with financing. I thought of financing as well but thought against it for insurance purposes. I've chosen to save up the cash to pay for a boat outright. Stay Awesome and hope to hear from you soon. David
Banks like to do home loans because they can sell the loan in the secondary market, AND the collateral APPRECIATES. Boats depreciate, and repo boats super depreciate, so the collateral is heavily discounted and get high interest rates and high insurance costs....
For clarity, boat loans are sold on secondary markets just like homes. However, you are correct about depreciation and why the banks are so guarded about these loans. They want an incredibly low risk with ample profit. Don't we all. I think the core message is the banks can want whatever they want to issue a loan. It doesn't mean we have to participate. Many will and still sign up for that bad deal but hopefully people will be smarter and just leave the banks on the sideline by buying a boat they can pay cash for.
Rob does a great job breaking down this super tricky part of boating. I had the pleasure of meeting this couple and they are extremely nice and helpful. They went out of their way to help me out and I really appreciate their kindness. Please follow these guys to help support them. They are a small channel that needs your love. Thanks again Rob and Emily for your kindness!
Break free and go sailing after 20 years of debt. Gonna continue refitting the Hurley 27 I paid like 4k for then go ocean sailing on that nice full keel. Financing something like this is wild.
There are reasons to do it. Our plan was actually a short term plan and it would have helped bridge a time of about 5 years and would have landed us on a nicer boat. Some people make these their true homes and work from them. We don't think people financing their land-based home is wild. Still, we are happier we did not.
My wife and I are about 5 years out and this is the exact type of information I have been looking for. Thank you sharing the information. Also what did you end up buying?
Stay tuned for a boat tour video soon. Please subscribe. Or, you can follow us on Facebook. Look up Breaking Free Sailing and follow the page. You will a lot about our boat there and more realtime updates on our journey. Good luck on your adventure! Come find us out here.
BMO Bank of the West specializes in RV and boat loans. 15% down 20+ year financing. Credit check and insrurance is only requirement. Boat is the collateral. Close online. Took 7 days to close on $180,000 loan.
Nice! Thanks for sharing. As I did say in the video up front, my comments were about loans larger than $200k. Maybe this bank will go that big. Would be awesome if they did.
what kind of credit score did you have(dont need the exact number)? was it in the 800 range being discussed here because I've been hearing everything from high 600s to now 800s in this video.
Another thing to add to your logic about the "liveaboard" concern. I would think even someone who was not looking to liveaboard, could take the high loan and boat and leave the US waters and not pay the loan back. Don't see where the "liveaboard" option should spark the concern. Great video and thanks.
I feel many people know to avoid telling the bank how they intend on using the boat so they can get approved. It was just not something we wanted to do. I feel you are exactly correct, however. It's probably more likely that someone who would misrepresent a loan application would default than someone who would not lie to get the loan.
Almost everyone who could qualify for a loan for $400k will have a lot of assets on land. They just might not be in form of a house. They could very well still have significant income, too.
Cheers from Toronto. Question, is loan interest still tax deductible in the US? It isn't in Canada. A lot of wealthy people register boats in convenient jurisdictions and operate vessel as a business, at a loss. Most Super Yachts will charter out to create the illusion of a business.
We are, too. It's hard to let go of the trappings of land based life. They still call. It's harder to shed those comforts than it seems but it's worth it when you get there.
Seems like the decline could also be based upon the increased risk you pose by changing from a successful land based lifestyle which was the environment in which you generated wealth to a nomadic one, while still needing to earn the money to pay the loan. Banks will underwrite any risk if the reward is high enough.
If you say so. You don't know what we changed from. In our situation, we would have maintained income to not only successfully pay the boat note but our overall debt would drop making it more us more able to pay our boat-based home than we could when we had a land-based home.
Well I watched this out of curiosity. We don't borrow money for toys and we had just sold our cat, in Grenada. We are shifting our cruising area, we're kind of done with the Caribbean. So when you went through the list I was amazed, but then I had to laugh when you got the right answer. We did, however, carry insurance because if a liability issue comes up I want the insurer's attorneys between us and the plaintiff.
Buy a small boat that you can afford with on-hand cash. Learn to sail in that boat and make sure you love this hobby. If you do love the hobby, save some money as you learn to sail better in your small boat. Once you've saved up some cash, sell the small boat and buy a slightly bigger boat. Lather, rinse, repeat....
Any regrets on selling the house? I was thinking more turn it into an airbnb. that way I have a place to stay buy "renting" my own house when there is a break. Also, maybe after a year sometime i don't like it as much as i thought and go back to day sailing without getting priced out of the housing market.
The only way to get a loan like this is if you can unequivocally prove that you don't need one. Then you will be required to jump through hoops that you won't enjoy.
8.5% might as well call it 10 with insurance for the loan so 400000 after 5 years will have paid 200000 in interest pretty much , might as well wait save the money pay cash as you did really , if you had that down payment and the reserve they were asking for that means after 5 years you will be sitting on 400000 cash for a boat , that buys a decent one imho
That is the odd thing about everyone's own personal situation....it's never the same. We could have waited for 5 years and done exactly what you said. Who knows what would have happened in that 5 years. We're aging. We could get sick. We wanted to do this now so we can live our life now instead of living the life someone else wants us to live on the promise that someday we might get to live our life, if we are still able.
@@BFSailing So right , retired at 55 an thinking i'm going to buy a sailboat in Fla and enjoy the warmth , then realized we have grandkids an the wife is heavily involved in our church she doesn't want to go now and it's not about money it's about family so do i go alone of course not , have i given up on sailing no , but it's summer sailing and still freezing the winters away except for some travel . as you age things change
Now that I’m debt free, listening to this makes me realize how stupid I’ve been my entire adult life and the fortune I’ve given up to the bankers. And the boats I’ve financed over the years. On an asset that depreciates faster than an anchor being deployed in 300’ water. I’m finally able to buy a boat without a loan and it is so liberating
As I was listening to your comments about the loan process I was thinking "Loan? Just pay cash. My view is if you can't afford to pay cash, you can't afford the boat. The only reason I can see to take out a boat loan is if the boat will be run as a business. Then, since you can deduct the loan costs, the loan makes some sense as a tax strategy. Also, your comment about insurance suggests that you don't carry insurance. You need liability as a minimum or you can find yourself in big financial trouble very quickly, plus most marinas won't let you in without insurance.
We have plenty of liability coverage. We don't want to be in a marina and that is pretty much only in Florida. It won't be the case for most of the Caribbean, either. But you are exactly correct. The marinas won't let you in if you can't add them as an insured party to your insurance.
You are suggesting self financing (paying cash) for a $500k boat (most people's life savings) and going uninsured. That is surely an ugly truth and a very, very bad idea. You cant even go into most marinas nowadays without proof if insurance.
No. I'm not and we didn't. We had to buy a different kind of boat that didn't cost as much. Also, everyone's financial situation is different. Marinas in Florida won't let you in without PoI. Marinas just about anyplace else will. We don't want to be in Florida, anyway.
If you don't have the money to pay cash you can't afford it most people that think there going to sail the rest of there life get there ass handed to them
I try never to assume what someone's situation might be. There might be reasons, like the one we considered when we tried for financing. Sometimes borrowing money is a short term thing to help with cash flow for a few years until new funding becomes available.....like retirement funds.
No. I hope that was not the message that came across. You have to be flexible. Almost everyone can pay cash for some kind of boat somewhere that is at least able to get off shore to the Caribbean. You just have to be willing to accept the boat you can afford and go do it. You won't regret it when you get there. You will still be anchored at the same islands in the same waters as everyone else and that's what you are going for.
But thats what you said. And it dosnt matter. Its probably more imnportant for someone with a cheaper boat to have insurance and abide by the policy. They can not afford a catasgrohic loss where a rich guy can.. .
Basically, yes OR sell your house and live on-board instead OR buy a used monohull. With $100K to $150K you can find a mono perfectly capable of taking you to the Caribbean
Well at the end of the day, paying back a loan is about ability and integrity. Everyone knows that Michigan cheats so that could be part of the problem. So I will give you high marks on you ability but you have to get your priorities straight.
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My late father had an opinion about bankers:"They will happily loan you money, to buy an umbrella, on a sunny day. Be sure they will want the money back on the next rainy day"
'Bout sums them up I'd say!
Great perspective. Thank you!
Thank you! Great advice!
Great info. Just sub'd and will be watching!
Great info and appreciate the cold hard truth of financing, not talked enough about on so many CZcamsr sailing/cruising channels.
terrific video! thank you so much. you are so brave
thanks for the kind words!
Good stuff.....thanks.
Thanks for sharing this very stressful process. All the info was very useful information for those of us thinking about buying a boat. Be safe, we wish you fair winds and following seas...
Thank you! Good luck on your journey.
Excellent advise
Good info and advice. I didn't buy a big boat. I got a 20 year loan on a cutwater 26, which is more of a family day boat to us. I was turned down on the first app, but then approved by M&T.
excellent video
You are very well spoken! Excellent use of graphic overlay. We appreciate this information, I'm going to follow you! We are on our own journey towards a catamaran. Chartering a FP next month in the virgin islands - cant' wait!
You will LOVE it. Check out our FP vs Nautitech review we have posted on CZcams. The FP's are beautiful boats.
Great video.
Funny you mentioned that they won't lend to live aboards, the same thing with RV's. Even though we owned our house in Oregon but having to take work in Nashville, it didn't make sense to buy a house in Nashville and elected to full time. We did need a bigger rig for full time but they wouldn't lend to us and we have a credit rating of over 800. The next RV, we were aware of that. USAA googled the address we were staying and called saying that we were staying at a campground and whether we were full timing, I said hell no, we were staying there while we looked for a house, the loan was approved 5 minutes later.
Yes. Unfortunately, you have to bend some truths to get through approvals. We considered things we could do to obscure what we hoped to do but in the end decided to just be who we are and let the chips fall.
Much appreciated for sharing your experience. I am slowly working my way through the catamaran purchasing process. I found USAA to have a straight forward process without quite the stipulations you have experienced. Sadly the Cat I wanted was damaged in Idalia, so back to shopping.
That's very interesting. We are USAA members and looked at them. They did not seem able to loan the amount we were requesting which was similar to the amount shown in the video. Thanks for letting us and everyone know. Maybe they are opening up a little.
I'm glad you mentioned insurance. My father purchased a blue water ketch. All cash for the reasons you mentioned. He had gotten as far as the USVIs when he was hit by a hurricane. The boat broke the mooring after two other boats locked together hit him. All three went to the beach. 😢. The insurance company refused to cover him because of location. The local insurance went bankrupt because of huge losses so even if he'd had supplemental policy that would have not paid either.
Yes. The insurance company operated under the agreement your father signed. He has no complaint against them.
This is one of the very difficult things. Banks don't want to loan to liveaboards and in fairness, it's probably because insurance companies don't want to cover liveaboards. We opted for liability only because, even if we said the magic things to get insurance, our claim would probably be denied after they discovered how much we're on the boat and that we don't have a real home port.
These were my thoughts exactly, in our case. A friend of ours anchored next to us in The Bahamas just took a lightening strike. They were fully insured in Canada but the insurance company said their deductible would be $15,000 because they were not in Canada when it happened. It's NOT friendly to liveaboards and travelers. However, other comment on this video spoke about their uninsured father losing the boat to a hurricane. It was on a mooring. I have a hard time taking how an unmanned boat is less at risk than a boat that has an owner on board 24x7x365. If a hurricane is coming our way, we leave. We're NEVER going to ride one out. We're always with the boat. Just move it. These things don't sneak up on you.
@@BFSailing I was during Hurricane Hugo. He knew the storm was coming and secured the best anchorage available. He rode out the storm on the boat doing his best to save her. After the boat broke loose they were driven to the beach. He spent the night inside the boat while it was pounded by the storm. This was not a matter of seamanship or lack of effort.
My point was as a live an aboard it is very difficult to secure adequate insurance. Even if he had purchased local insurance in the USVI he would not have received a settlement. The devastation was so great that the local insurance companies went bankrupt not paying any of the claims.
@@peteharper3614 Peter, If he was aboard and road it out, I'm glad he's safe. I was not implying poor seamanship or lack of experience or any superior experience on my part with my observation. I was trying to emphasize what you have confirmed in that the insurance companies often end up not paying or invoking some misunderstood clause due to the complexity of the policies and their restrictiveness. It's unfortunate that the insurance company bankrupted. There needs to be some kind of insurance for insurance. FDIC insures a bank losing your money. There should be a guarantee when an insurance company promises to cover you and they don't.
I was also commenting on the negative look insurance companies have on live aboard owners. Even though he was on the boat and trying to save it (again - no inference of incompetence implied in any way) he probably didn't have the ability to run from the storm. He probably didn't have 3 weeks of time available where he could have made the decision to leave the area a week ahead of time, wait the storm out in some other locations, and then use another week to bring the boat back home. That's not a realistic hurricane plan for owners who are not in a position to stay on their boat full time. Also, I bet many other boats were destroyed where the owners were NOT on board and able to try to save the boat. Boats that are owned by non live aboard sailors are often left in the path of the storms and the owner is not there. His presence was probably the rare situation. Usually, only people who live on their boat have the ability move it out of the way of destruction. What I was speaking to was that the insurance company's actuary calculations predict that there is GREATER risk when someone lives aboard a boat but I'm not seeing how there is greater risk. It seems short sighted to me.
Amen! Go now!
Over here in The Netherlands, the mortgages on (Sail- and Motor-) boats ended beginning 2000's and loans for (Sail- and Motor-) boats are hardly approved. So, one need cash to buy a boat and man do we have marina's full of boats hardly moving out their berth...
I couldn't agree more with the buy now and what you can afford. Paying cash is generally always better if possible. I would however say that the one type of loan that might make sense for the few people that have this available to them is a whole life insurance loan.
Terrific video. Really helpful. The finance credit business just seems so strange. It's like a series of secret steps they want you to take but they'll never tell you upfront what they are. You lay out exactly what is required before someone should even apply for a boat loan. When I put a deposit on a boat I was introduced to a loan person. She told me two things, 'Well, not right now...." And "You should be thinking about your next boat because on average people change boats every 4 and a third years." We won't loan you the money for this boat, but we want you to be thinking about the next one.... What was the point? She could've simply told me what's in your video. I'd have said, "Oh, okay let me do all that and then apply for the loan." I guess they gain somehow by having a stack of applications. I was looking for a starter/training boat, found a much nicer one, bluewater ready, had already been to New Zealand and back. Overpaid a bit (cash), cancelled the new boat. Now I have a nice boat, not as nice as the one.... but no boat payment.
Nice! Go with what you can. Go now! Congratulations!
We had no trouble get a much bigger loan last year with a company called La Victoria. Also had good experience with Bank of the West too in the past
Thanks for sharing. Maybe someone will use them.
@12:18 Give "Seasteading : How Floating Nations Will Restore..." by Joe Quirk a read. Mind blowing.
It has always been the case that, "Those who can get loans don't need loans. Those who need loans can't get them."
Very true.
Yeah, I'd never buy a 500k boat unless I had about four times that in the bank. Which personally, mean's if I ever get a boat I'm probably looking at around a 50k boat.
According to IRC section 163(h) (4), a boat will be considered a qualified residence if it is one of the two residences chosen by the taxpayer for purposes of deductibility in the tax year. A qualified residence must have basic living accommodations including sleeping space (berth), a toilet (head), and cooking facilities (galley). If the boat is also chartered, the taxpayer will have to use the boat for personal purposes for either more than 14 days or 10% of the number of days during the year the boat was actually rented, to qualify for the interest deduction in accordance with IRC section 280A(d)(1).
What a reality check...adjusted expectations for sure
Don't be discouraged. Your boat that is right for you is out there and you will love it when you're sitting on anchor at some fabulous place.
@@BFSailing Thanks for that, I retire at 60 in 8 years. Plan is to refresh my sailing skills this summer with some lessons, then charter day trips on a mono for a couple of years. If that sticks may buy a mono. If that sticks will take captain lessons in the bahamas and then on retirement get serious about a Cat. Baby steps tho...
Whelp! The credit business puts me out. I have no credit because I own everything I possess. House and cars and no loans. The debt ratio boondoggle is such a scam. Save and invest well!
We bought our boat with cash too. Sailing in Hawaii is awesome!
Congratulations! We'll meet you in French Polynesia.
Maybe! BTW I’m from Portland Michigan! Go Blue!!!
Borrowing to buy a used boat with a term more than 5 years doesn’t make much sense if you have no other assets, IMHO. If I bought a boat as a live aboard & I wanted to keep my home, I might borrow up to 50% of my home’s FMV with a term of no more than 10 years & rent it out as long as the rent net of tax covered the loan payments & realty taxes. With the proceeds of the loan, I’d allocate no more than 60% to the purchase & 40% to fund refits & repairs. So, on a $500k boat, I’d need $350k cash & a $250k loan - 150K towards purchase & $100k for refits & repairs. Then I’d want my after tax income to cover the $4-6k per month I budgeted to sail.
I was trying to figure it out too. I plan on turning my home property into rental property but finance a boat while I'm still home and working so I can get a good lender and stuff. I have one rental property now and with my retirement and property I should bring home around 10k a month after taxes. Looking at trying to get a 46ft monohaul so we shall see.
Sometimes people borrow money to cover a gap in time until they can access other funds, like retirement or other forms of income. Just because you take a 20 year loan does not mean you keep the 20 year loan for 20 years but you might benefit in the short term from paying a lower payment.
@@BFSailing Good point - hope for the best, but be prepared for the worst.
Thank you for the heads up. I have already started getting rid of my credit cards debt. I went from $23,000 to $829. FICO was 524 to 837. I also paid off my house and old car. College loan gone 35 years ago.
There is no better way to throw away money than by buying things that you can't afford with money that you don't have. If you're going to work for a bank, you are far better off being behind the counter than you are in front of it.
In general, I agree. Sometimes you borrow money to cover a time gap until you can get to money you have, like retirement funds.
Nice work! Keep going! See you out here soon!
You missed the point.@@davidbrayshaw3529
Hi, I have a question: If one pays cash outright for a boat, can they get liability insurance instead of full coverage insurance; similar to a car? Meaning, the insurance company is not responsible for repair and/or replacement of your boat. The liability insurance is only for damage to property of others if your boat should damage someone's property. By the way, thanks for posting your experience with financing. I thought of financing as well but thought against it for insurance purposes. I've chosen to save up the cash to pay for a boat outright. Stay Awesome and hope to hear from you soon. David
Yes. You can get liability only.
Banks like to do home loans because they can sell the loan in the secondary market, AND the collateral APPRECIATES. Boats depreciate, and repo boats super depreciate, so the collateral is heavily discounted and get high interest rates and high insurance costs....
For clarity, boat loans are sold on secondary markets just like homes. However, you are correct about depreciation and why the banks are so guarded about these loans. They want an incredibly low risk with ample profit. Don't we all. I think the core message is the banks can want whatever they want to issue a loan. It doesn't mean we have to participate. Many will and still sign up for that bad deal but hopefully people will be smarter and just leave the banks on the sideline by buying a boat they can pay cash for.
Rob does a great job breaking down this super tricky part of boating. I had the pleasure of meeting this couple and they are extremely nice and helpful. They went out of their way to help me out and I really appreciate their kindness. Please follow these guys to help support them. They are a small channel that needs your love. Thanks again Rob and Emily for your kindness!
Break free and go sailing after 20 years of debt. Gonna continue refitting the Hurley 27 I paid like 4k for then go ocean sailing on that nice full keel. Financing something like this is wild.
There are reasons to do it. Our plan was actually a short term plan and it would have helped bridge a time of about 5 years and would have landed us on a nicer boat. Some people make these their true homes and work from them. We don't think people financing their land-based home is wild. Still, we are happier we did not.
My wife and I are about 5 years out and this is the exact type of information I have been looking for. Thank you sharing the information. Also what did you end up buying?
Stay tuned for a boat tour video soon. Please subscribe. Or, you can follow us on Facebook. Look up Breaking Free Sailing and follow the page. You will a lot about our boat there and more realtime updates on our journey.
Good luck on your adventure! Come find us out here.
BMO Bank of the West specializes in RV and boat loans. 15% down 20+ year financing. Credit check and insrurance is only requirement. Boat is the collateral. Close online. Took 7 days to close on $180,000 loan.
Nice! Thanks for sharing. As I did say in the video up front, my comments were about loans larger than $200k. Maybe this bank will go that big. Would be awesome if they did.
what kind of credit score did you have(dont need the exact number)? was it in the 800 range being discussed here because I've been hearing everything from high 600s to now 800s in this video.
Another thing to add to your logic about the "liveaboard" concern. I would think even someone who was not looking to liveaboard, could take the high loan and boat and leave the US waters and not pay the loan back. Don't see where the "liveaboard" option should spark the concern. Great video and thanks.
if you're not living aboard you likely have assets on land that they can go after. house cars garnishable wages
I feel many people know to avoid telling the bank how they intend on using the boat so they can get approved. It was just not something we wanted to do. I feel you are exactly correct, however. It's probably more likely that someone who would misrepresent a loan application would default than someone who would not lie to get the loan.
Almost everyone who could qualify for a loan for $400k will have a lot of assets on land. They just might not be in form of a house. They could very well still have significant income, too.
@@BFSailingOn land in the US though?
Cheers from Toronto. Question, is loan interest still tax deductible in the US? It isn't in Canada. A lot of wealthy people register boats in convenient jurisdictions and operate vessel as a business, at a loss. Most Super Yachts will charter out to create the illusion of a business.
Hasn’t been since Reagan.
I'm glad that you and your wife came to your sanity. What's the point of breaking free and having the freedom if you're still tethered to the man.
We are, too. It's hard to let go of the trappings of land based life. They still call. It's harder to shed those comforts than it seems but it's worth it when you get there.
Seems like the decline could also be based upon the increased risk you pose by changing from a successful land based lifestyle which was the environment in which you generated wealth to a nomadic one, while still needing to earn the money to pay the loan. Banks will underwrite any risk if the reward is high enough.
If you say so. You don't know what we changed from. In our situation, we would have maintained income to not only successfully pay the boat note but our overall debt would drop making it more us more able to pay our boat-based home than we could when we had a land-based home.
Well I watched this out of curiosity. We don't borrow money for toys and we had just sold our cat, in Grenada. We are shifting our cruising area, we're kind of done with the Caribbean. So when you went through the list I was amazed, but then I had to laugh when you got the right answer. We did, however, carry insurance because if a liability issue comes up I want the insurer's attorneys between us and the plaintiff.
We do have liability insurance.
Buy a small boat that you can afford with on-hand cash. Learn to sail in that boat and make sure you love this hobby. If you do love the hobby, save some money as you learn to sail better in your small boat. Once you've saved up some cash, sell the small boat and buy a slightly bigger boat. Lather, rinse, repeat....
I thought it was funny that you mentioned buying a “blue water boat OR a catamaran.” 😂
Any regrets on selling the house? I was thinking more turn it into an airbnb. that way I have a place to stay buy "renting" my own house when there is a break. Also, maybe after a year sometime i don't like it as much as i thought and go back to day sailing without getting priced out of the housing market.
So.....five months later and we have Zero regrets.....we are trying to figure out how to eliminate the rest of our land ties.
OMG I just watches the Truman Show and those clouds on the water look "fake" haha
I can't afford a catamaran, going the sailboat route. Don't want to be in debt. Maybe someday, but not going to wait for that day.
Love that you don't want to be in debt! Break free from all of those ties.
The only way to get a loan like this is if you can unequivocally prove that you don't need one. Then you will be required to jump through hoops that you won't enjoy.
8.5% might as well call it 10 with insurance for the loan so 400000 after 5 years will have paid 200000 in interest pretty much , might as well wait save the money pay cash as you did really , if you had that down payment and the reserve they were asking for that means after 5 years you will be sitting on 400000 cash for a boat , that buys a decent one imho
That is the odd thing about everyone's own personal situation....it's never the same. We could have waited for 5 years and done exactly what you said. Who knows what would have happened in that 5 years. We're aging. We could get sick. We wanted to do this now so we can live our life now instead of living the life someone else wants us to live on the promise that someday we might get to live our life, if we are still able.
@@BFSailing So right , retired at 55 an thinking i'm going to buy a sailboat in Fla and enjoy the warmth , then realized we have grandkids an the wife is heavily involved in our church she doesn't want to go now and it's not about money it's about family so do i go alone of course not , have i given up on sailing no , but it's summer sailing and still freezing the winters away except for some travel . as you age things change
Now that I’m debt free, listening to this makes me realize how stupid I’ve been my entire adult life and the fortune I’ve given up to the bankers. And the boats I’ve financed over the years. On an asset that depreciates faster than an anchor being deployed in 300’ water. I’m finally able to buy a boat without a loan and it is so liberating
Awesome! Congratulations!
The whole idea is to break free 👍
Yes. In the end, that is what we want. Best wishes!
If it flies, floats, or F’s, just rent it.
As I was listening to your comments about the loan process I was thinking "Loan? Just pay cash. My view is if you can't afford to pay cash, you can't afford the boat. The only reason I can see to take out a boat loan is if the boat will be run as a business. Then, since you can deduct the loan costs, the loan makes some sense as a tax strategy. Also, your comment about insurance suggests that you don't carry insurance. You need liability as a minimum or you can find yourself in big financial trouble very quickly, plus most marinas won't let you in without insurance.
We have plenty of liability coverage. We don't want to be in a marina and that is pretty much only in Florida. It won't be the case for most of the Caribbean, either. But you are exactly correct. The marinas won't let you in if you can't add them as an insured party to your insurance.
🙏 'Promosm'
You can get a 20 year on any boat loan with a loan balance over 50k
Agreed. It gets a little different when the loan is for more than $200k
You are suggesting self financing (paying cash) for a $500k boat (most people's life savings) and going uninsured. That is surely an ugly truth and a very, very bad idea. You cant even go into most marinas nowadays without proof if insurance.
No. I'm not and we didn't. We had to buy a different kind of boat that didn't cost as much. Also, everyone's financial situation is different. Marinas in Florida won't let you in without PoI. Marinas just about anyplace else will. We don't want to be in Florida, anyway.
Never heard of a loan requiring 800 or above FICO score.
Neither had I. Try borrowing a few hundred thousand dollars for a boat and you will.
Good info to know. @@BFSailing
Buy cash and don’t insure.
If you don't have the money to pay cash you can't afford it most people that think there going to sail the rest of there life get there ass handed to them
I try never to assume what someone's situation might be. There might be reasons, like the one we considered when we tried for financing. Sometimes borrowing money is a short term thing to help with cash flow for a few years until new funding becomes available.....like retirement funds.
Rich people committing financial crimes? Unheard of.
Debt is dum, Cash is king. Save money and buy cash!!
Dollar is credit based, dollar is debt
Fiat is the worst investment just look at it buying power decline. Assets are safer than fiat
So basically, you have to be rich.
If you have to ask,,,, Purchase cost is just the entry point.
@cliffcrowley3756 I don't have to ask... I've been there. Like most Americans, my entry price is far far, far lower than $400,000 +.
No. I hope that was not the message that came across. You have to be flexible. Almost everyone can pay cash for some kind of boat somewhere that is at least able to get off shore to the Caribbean. You just have to be willing to accept the boat you can afford and go do it. You won't regret it when you get there. You will still be anchored at the same islands in the same waters as everyone else and that's what you are going for.
But thats what you said. And it dosnt matter. Its probably more imnportant for someone with a cheaper boat to have insurance and abide by the policy. They can not afford a catasgrohic loss where a rich guy can.. .
Basically, yes OR sell your house and live on-board instead OR buy a used monohull. With $100K to $150K you can find a mono perfectly capable of taking you to the Caribbean
Too bad, I guess Jim Harbaugh didn't share the signs with you about the "game" plan.
If you have to finance a blue water vessel you’re not ready to leave.
Well at the end of the day, paying back a loan is about ability and integrity. Everyone knows that Michigan cheats so that could be part of the problem. So I will give you high marks on you ability but you have to get your priorities straight.
This felt a little like a humble brag. This is a lot of drama for a $500k boat, just pay cash?
😂😂😂 Should be"' The ugly truth about financing anything. Until this administration and its masters get gone, expect it to get much worse.
If you want to throw your money away buy a Catamaran. People with more money than brains.
I thought it was funny that you mentioned buying a “blue water boat OR a catamaran.” 😂