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Old 11-13-2015, 10:14 PM   #21
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As far as the IRS? If you are considering taking out a mortgage on a boat, their won't be much for the IRS to take anyway. Or there soon won't be.
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Old 11-14-2015, 12:20 AM   #22
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Geez folks. The guy asked a pretty simple question.

BB&T is my suggestion!!!!
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Old 11-14-2015, 01:47 AM   #23
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Quote:
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If you can't afford to buy the toy I'd consider buying a smaller/cheaper one. Can't relate to buying a yacht on credit. One can always go canoeing.

Could be special circumstances that would perhaps justify it though.

I guess it depends how you want your money to work for you, or not! Interest rates are so low it's almost no interest. I can make much more from the market than the current interest percentages. Try Sterling mortgage, I got a rate quote for a substantial number for under 4% for a 20 year with 20% down.
Good luck!


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Old 11-14-2015, 07:30 AM   #24
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With the right balance sheet and bank advisor an LOC will provide you with the lowest rates.
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Old 11-14-2015, 07:31 AM   #25
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Might look to the institution that manages your retirement accounts. When financing my home 12 years ago, my best rate came from the investment bank that holds my portfolio. They used the portfolio as collateral on the loan giving me the best rate based on the collateral to debt ratio. While I wouldn't finance anything but a house, taking an investment which has a higher average annual rate of return than a fixed rate loan, liquidating it and paying capital gains on the proceeds before buying your boat, can seem very counter intuitive.

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Old 11-14-2015, 07:56 AM   #26
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Oscar,

You may want to consider an equity loan against your home. Those rates are usually better than the best "Boat Loans".

YMMV

Rob
I would use caution doing this. I don't know that it is really a good idea to attach your boat to your house. If you default on your boat loan, the could put a lien on your home. I was always advised to keep the two separate.
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Old 11-14-2015, 08:03 AM   #27
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Hello Oscar,


We have used Essex and Coastal financial with good results. The rates at Essex now are well under 4% and they are very easy to work with so I would go with them at this time.
Good luck with the new adventure...
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Old 11-14-2015, 08:24 AM   #28
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I've seen a home equity loan and using one's investments/retirement as collateral suggested here. I strongly advise against both. While some early in this thread were adamant against borrowing for a boat, I don't feel as strongly negative as they expressed. It can be ok for some to do. However, I would never put my home, my retirement, major assets that I can't afford to lose at risk for a luxury like a boat or vacation home or any number of other luxury items. The boat loses value too rapidly and in the event one runs into problems in other areas, they may find themselves unable to sell the boat or at least unable to for anything close to what it's worth. That could lead to some form of foreclosure, perhaps voluntary, maybe even a workout plan on the uncovered debt. We all think these type things will not befall us, but one severe medical situation, some bad investments, a tragedy in our lives, a serious and very expensive health issue, can hit us. It's one thing to borrow against a boat for a boat, but not to risk our home or retirement or our kids education.
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Old 11-14-2015, 10:03 AM   #29
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As stated before, rates have a lot of dependencies.

I too have have had goods results from BB&T.
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Old 11-14-2015, 11:59 AM   #30
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Band B is in favor of paying cash and strongly advises against borrowing against investments. If paying cash, wouldn't the funds come from your investments? If the unlikely event of a loan default happens, the lender takes the outstanding balance from your investment that was used as collateral. What's the difference?

To me, the person opting to borrow against his investments to buy whatever is obviously making more in his investments than the interest on the loan or he is a fool. Lets say the loan amount is $300k, loan interest is 4%, investment interest is 6% and life of loan is 20 years. A quick math tells me that you are ahead $120k for the life of the loan if you borrowed, or lost the same amount if paid in cash.
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Old 11-14-2015, 12:16 PM   #31
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Band B is in favor of paying cash and strongly advises against borrowing against investments. If paying cash, wouldn't the funds come from your investments? If the unlikely event of a loan default happens, the lender takes the outstanding balance from your investment that was used as collateral. What's the difference?

To me, the person opting to borrow against his investments to buy whatever is obviously making more in his investments than the interest on the loan or he is a fool. Lets say the loan amount is $300k, loan interest is 4%, investment interest is 6% and life of loan is 20 years. A quick math tells me that you are ahead $120k for the life of the loan if you borrowed, or lost the same amount if paid in cash.
My first choice is to pay cash. But if borrowing I would not make it against retirement funds or my home. The only collateral I would give would be the boat itself. Collateralizing a loan for a luxury item with a necessity item just isn't wise to me.

Your math is way off. It assumes the entire balance outstanding the entire period of the loan, Cut it in half, then look at the future value of that money and you're undertaking a substantial risk for a small amount of gain. I'm conservative. I don't want to depend on the investment income being 6%. There are many years in which investments lose money, different types of investments, different times. There will be a huge amount of money lost on Monday if my guesses are correct.
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Old 11-14-2015, 12:32 PM   #32
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We need to stop assuming that every person seeking boat loan advice here is not financially savvy or cannot afford a boat. It seems to happen all the time. Some of the responses are downright insulting. Just because your grandpa told you to pay cash doesn't mean that that's a smart financial move for others. There are many good reasons to finance a boat as there are to pay cash.

OP, check Key Bank, they only offer boat loans in select states, but when I got my boat loan through them, they offered a better loan-to-value than the others and rates were competitive.
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Old 11-14-2015, 12:58 PM   #33
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We need to stop assuming that every person seeking boat loan advice here is not financially savvy or cannot afford a boat. It seems to happen all the time. Some of the responses are downright insulting. Just because your grandpa told you to pay cash doesn't mean that that's a smart financial move for others. There are many good reasons to finance a boat as there are to pay cash.

OP, check Key Bank, they only offer boat loans in select states, but when I got my boat loan through them, they offered a better loan-to-value than the others and rates were competitive.
You're right that we need to answer the question asked. I did so in my first post in this thread. You've done the same. I knew Key Bank was once huge in boat loans and offered boat mortgages in far more of the country that the states listed now. Unfortunately, they don't offer in the OP's state of Pennsylvania.
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Old 11-14-2015, 01:19 PM   #34
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My first choice is to pay cash. But if borrowing I would not make it against retirement funds or my home. The only collateral I would give would be the boat itself. Collateralizing a loan for a luxury item with a necessity item just isn't wise to me.

Your math is way off. It assumes the entire balance outstanding the entire period of the loan, Cut it in half, then look at the future value of that money and you're undertaking a substantial risk for a small amount of gain. I'm conservative. I don't want to depend on the investment income being 6%. There are many years in which investments lose money, different types of investments, different times. There will be a huge amount of money lost on Monday if my guesses are correct.
My quick math is off but not way off. $300k left in investments making a conservative 6% in 20 years will have a future value of $962k. Payment (P&I) on a $300k loan paying 4% interest over a 20 year term is $1818/ month. The future value of $1818 a month over 20 years at 6% is $824k. The difference is $138k. How was I way off? Am I missing something in my calculation?
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Old 11-14-2015, 01:25 PM   #35
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I used Essex.
Super easy with an excellent rate.
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Old 11-14-2015, 02:01 PM   #36
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While I generally believe in paying cash for things like boats and houses, I can see a situation where it makes sense to borrow. Basically it comes down to return on investment versus interest on the borrowed money. If the return on investment is greater than the cost of borrowing, then borrowing makes sense. However, I think that you should have the cash on hand to pay off the loan if the cost of the loan becomes larger than your return on investments (i.e., if your investments tank).

Now lets consider the economics of buying a boat with a $300,000 loan at 4% and keeping the $300K invested at 6%. A typical boat loan is has a 15 year term, the at 4% the monthly payment would be $2,220 or $26,640 per year. The 6% return on the $300K investment would be $18,000 per year. If you are using the investment income to make the mortgage payments you will be behind $8,640 per year that has to be made up from somewhere. You can either pay the $8,640 from other income or from investment capital, which reduces capital and your return. If you continue to do that each year you will have to dip deeper into your investment fund since the previous year's dip will decrease your return. If you run the number you will find that at the end of the loan term you will have spent $400K to pay off the loan and will have cut your investment to around $100K.

In contrast if you pay the $300K up front your cost is the lost income on that money. How much that is depends on if you are spending that income or reinvesting it. If you had spend it annually the cost comes to $270,000. If you invest the income at the same rate as the initial investment the cost is about $420,000. In the second case buying the boat on time is a wash. In the first case you spend about $130K more to buy the boat with a loan than with cash. Basically it comes down to your ability to service the loan out on non-investment income. If you can pay the loan ot of non-investment income the result is effectively a wash, but if you have to use investment income to pay the loan, you will come out behind the cash case.
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Old 11-14-2015, 02:08 PM   #37
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I'm with Essex, who is actually Bank of the West, at 4.25% so I probably didn't hit the bottom of the interest rates when I did my deal. I do get the second home deduction for my boat, the requirements are separate spaces for cooking, sleeping, and I think a full bathroom. RV owners get it too, so no reason why the IRS would flag a boat owner if the requirements are met.

I didn't have the cash in hand, want to do it while I have the health and interest to be doing it, and it beats the heck out of playing around in a canoe when I could be out enjoying my trawler. Cash sounds great, but some of us don't have it and there is no reason to deprive yourself of something you really want if you can afford it.

All of the arguments for depreciation mean nothing when you are willing to admit that "no matter what", boats are a black hole you pour money into. Either it's worth doing (to you) or it's not. You will never get your money back out of it, and you can't take it with you when you go.

Go for it! JMO
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Old 11-14-2015, 02:10 PM   #38
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"My quick math is off but not way off. $300k left in investments making a conservative 6% in 20 years will have a future value of $962k. Payment (P&I) on a $300k loan paying 4% interest over a 20 year term is $1818/ month. The future value of $1818 a month over 20 years at 6% is $824k. The difference is $138k. How was I way off? Am I missing something in my calculation?"


Mahal - I believe it is even better than that if you can use the boat loans interest as a write off on taxes and leave invested money that is in tax exempt accounts alone.
It makes the marginal rate on recent boat loans often lower than 2.5%. This is typically why paying off a decent rate home loan early does not make financial sense unless someone would lack the planning/self control to put the difference into investments preferably tax deferred. Right now if a couple are both working earners and over 55 they might be able to move near $60K per year into tax deferred accounts some of which may have employer matches.

Eventually it is just math but there are times when taking the loan will save you money.
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Old 11-14-2015, 02:16 PM   #39
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One more point on investment vs financing, if the investing advantage cannot be sustained, then just liquidate the investment and payoff the loan.
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Old 11-14-2015, 02:47 PM   #40
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Quote:
Originally Posted by smitty477 View Post
"My quick math is off but not way off. $300k left in investments making a conservative 6% in 20 years will have a future value of $962k. Payment (P&I) on a $300k loan paying 4% interest over a 20 year term is $1818/ month. The future value of $1818 a month over 20 years at 6% is $824k. The difference is $138k. How was I way off? Am I missing something in my calculation?"


Mahal - I believe it is even better than that if you can use the boat loans interest as a write off on taxes and leave invested money that is in tax exempt accounts alone.
It makes the marginal rate on recent boat loans often lower than 2.5%. This is typically why paying off a decent rate home loan early does not make financial sense unless someone would lack the planning/self control to put the difference into investments preferably tax deferred. Right now if a couple are both working earners and over 55 they might be able to move near $60K per year into tax deferred accounts some of which may have employer matches.

Eventually it is just math but there are times when taking the loan will save you money.
Good point. I didn't even think of the tax benefit. Funny you should mention paying off home loans. I received a check yesterday from the sales of an investment property and I jokingly told my wife that we can pay off our house, buy a bigger boat and go cruising. She said it wouldn't be smart to give up the 3.25% interest and the tax deduction at this time of our lives.
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