Reply
 
Thread Tools Display Modes
 
Old 11-15-2015, 09:56 PM   #61
Senior Member
 
oscar's Avatar
 
City: Bethlehem, PA
Country: United States
Vessel Name: Lady Kay V
Vessel Model: Don't know yet.....
Join Date: Oct 2015
Posts: 410
Quote:
Originally Posted by klee wyck View Post
It is also these same folks that are subject to high tax brackets where the interest write off can reduce the effective rate by over 1/3 and in the current environment result in an effective rate of under 3%. In the meantime, a moderate risk investment portfolio may yield nearly double that.
Bingo.
__________________
Advertisement

__________________
Currently boatless but looking. Avatar is my first boat....Holland, 1965 ish.....
oscar is offline   Reply With Quote
Old 11-16-2015, 04:29 AM   #62
TF Site Team
 
Baker's Avatar
 
City: League City, Tx
Country: Texas
Vessel Model: Carver 356
Join Date: Oct 2007
Posts: 5,406
Quote:
Originally Posted by KMA View Post
Funny you should mention this. We initiated an application with a lender (not going to mention names yet, but it's a well known marine lender), providing all the information they requested except financial statements, which hadn't been compiled yet. I made it clear to the person I was dealing with that:
  • We had not yet selected a boat, so could not provide specifics for the collateral. We did provide a maximum $$ we were looking for, along with proof of funds for the down payment.
  • We would forward the financial statements as soon as my CPA had them compiled.
We were looking for Pre-Approval/Pre-qualification (in real estate parlance), so we wouldn't have to use a financial contingency in any offer we made. A week letter we received a turn down letter from the bank stating:
  1. Our income was insufficient for the amount of credit requested, and
  2. The value of the collateral is insufficient
Clearly there was a disconnect in that the application should never have gone to underwriting, as it was incomplete. It's a typical case of the bank not listening to the customer. This was with a 791 credit score.

Suffice it to say that I'm thoroughly pissed! Now I get to start over, and there's a hard credit inquiry ding on my credit report, which will lower it 10-20 points for another 60-90 days.

I can go to Wells Fargo tomorrow, have my local banker fill out all the paperwork (so I don't have to), and get a mortgage on my house that will pay for the entire boat purchase, with no down payment. Remember, we own the house free and clear, and the only debt we have is a car payment. I can easily get a home loan if I make 6 figures... but I can't get a boat loan?
I don't think you can get pre-approved on a boat...generally speaking. The make/model/year of the boat make a HUGE difference in their decision to lend money. Marine lending is SIGNIFICANTLY different than lending money on homes. And the main difference is the collateral involved(it is a dereciating asset...it can sink...it can be stolen...it can "go away",etc.). You were asking for a loan where the collateral was unknown. You were practially asking for a non secured loan(in their eyes).
Whoever submitted the loan was not working very well on your behalf. Either that, or you weren't listening when they tried to tell you it wasn't going to happen. An agent for a finance company should have a very good idea of how you will qualify based on your credit worthiness and based on the boat you are buying. Their is really no need to get pre-approved. In fact, as you have found out, generally it is not going to happen.
I know someone that had enough cash in the bank to buy the boat many times over. He had excellent credit. And he ws turned down. Things happen. Of course he got the refusal letter after already purchasing the boat through another lender. His agent sent out a few applications and he was approved. But not by everyone.
__________________

__________________
Prairie 29...Perkins 4236...Sold
Mainship Pilot 30...Yanmar 4LHA-STP...Sold
Carver 356...T-Cummins 330B
Baker is offline   Reply With Quote
Old 11-16-2015, 06:43 AM   #63
KMA
Senior Member
 
City: Merritt Island
Country: U.S.
Join Date: Oct 2007
Posts: 471
That's the interesting part. Before we submitted a single document, we had a 30 minute conversation about pre-approval/qualification, and I was assured they could do it. If they had stated otherwise, there would never have been an application submitted or credit inquiry run. The entire conversation was predicated on "Can you do this?".

Even with Pre-Approval, the bank is still protected by the survey and all the other closing documents. All we were looking to do was to establish a financial cap. Again, we never got that far because the bank rep forwarded a clearly incomplete application to underwriting.

I'm going to call my personal banker today, and make an appt to start the mortgage process.

Here is a question: Has anybody ever (re)financed a boat after purchase?

For example, you pay cash for the boat, then attempt to get financing afterward?

Quote:
Originally Posted by Baker View Post
I don't think you can get pre-approved on a boat...generally speaking. The make/model/year of the boat make a HUGE difference in their decision to lend money. Marine lending is SIGNIFICANTLY different than lending money on homes. And the main difference is the collateral involved(it is a dereciating asset...it can sink...it can be stolen...it can "go away",etc.).
KMA is offline   Reply With Quote
Old 11-16-2015, 08:18 AM   #64
Guru
 
City: Northport
Country: USA
Join Date: Aug 2015
Posts: 537
"Here is a question: Has anybody ever (re)financed a boat after purchase?"

Yes - we have done that. Still it was much easier to just finance the boat at the onset and have an 'agreement' with the finance folks about the amount based upon the boats age and details as well as our finances.
As one example only Chris at Coastal Financial was able to let us know what value and rates they would give on a certain boat with specific options on the boat before we located the exact boat. That along with a few credit questions allowed him to let us know we were good to go for $XXX on that type and year of boat (assuming survey and insurance in place at sale time).
It was just never that difficult so perhaps you just need to contact the people that match your needs at this time.
FWIW - using a mortgage against the house always seemed to incur a number of fixed costs which when added up made the proposition unfavorable. YMMV
smitty477 is offline   Reply With Quote
Old 11-16-2015, 09:45 AM   #65
Guru
 
MYTraveler's Avatar
 
City: West Coast
Country: USA
Join Date: Apr 2014
Posts: 784
Quote:
Originally Posted by KMA View Post
Here is a question: Has anybody ever (re)financed a boat after purchase?

For example, you pay cash for the boat, then attempt to get financing afterward?
If you do, you won't be entitled to a home mortgage interest deduction. That applies only to acquisition indebtedness or refinances of acquisition indebtedness.
MYTraveler is offline   Reply With Quote
Old 11-16-2015, 09:50 AM   #66
Guru
 
MYTraveler's Avatar
 
City: West Coast
Country: USA
Join Date: Apr 2014
Posts: 784
Quote:
Originally Posted by klee wyck View Post
T
In a perfect world, the time value of money (interest rate or yield of an investment) is related to risk. The lower the risk, the lower the rate or yield. For folks with strong balance sheets and great credit scores/ history, the rates should be low. For those same folks, it can make some sense to take some risk in an investment portfolio in which case the yield can likely be higher than the rate on a low risk loan. It is also these same folks that are subject to high tax brackets where the interest write off can reduce the effective rate by over 1/3 and in the current environment result in an effective rate of under 3%. In the meantime, a moderate risk investment portfolio may yield nearly double that.
You are comparing after-tax cost with before tax return. And since the boat loan is full-recourse, it should be regarded as risk free and compared to the lowest risk investments in your portfolio, and still adjusted for the investment's risk. Also, home mortgage interest is an AMT item, so, depending on your AGI, you aren't really saving the marginal tax rate.
MYTraveler is offline   Reply With Quote
Old 11-16-2015, 10:00 AM   #67
Guru
 
City: Northport
Country: USA
Join Date: Aug 2015
Posts: 537
"If you do, you won't be entitled to a home mortgage interest deduction. That applies only to acquisition indebtedness or refinances of acquisition indebtedness."


Please help me locate this treatment in the tax document.


https://www.irs.gov/publications/p936/ar02.html
smitty477 is offline   Reply With Quote
Old 11-16-2015, 10:02 AM   #68
Senior Member
 
City: Jarrettsville, MD.
Country: usa
Vessel Model: Mainship Pilot 30' Rumrunner
Join Date: Mar 2015
Posts: 103
Boat Loans - Sterling Acceptance
Try this, not going to debate the cash VS loan.
jskinner30PII is offline   Reply With Quote
Old 11-16-2015, 10:05 AM   #69
Guru
 
City: Northport
Country: USA
Join Date: Aug 2015
Posts: 537
"You are comparing after-tax cost with before tax return."

If you do not remove funds from a tax deferred account it will continue to receive whatever interest it collect tax free.


"Also, home mortgage interest is an AMT item, so, depending on your AGI, you aren't really saving the marginal tax rate."


But if you do itemize (like us) you will realize the interest deduction in the year that it is paid and that can be in excess of 1/3rd the payment in early years - we are very lucky to be in NY where the rates are near the highest.


The only valuable point is that its is just math and loans can mean different things with different people.
smitty477 is offline   Reply With Quote
Old 11-16-2015, 10:18 AM   #70
Guru
 
City: Carefree, Arizona
Country: usa
Vessel Name: sunchaser V
Vessel Model: DeFever 48
Join Date: Apr 2008
Posts: 5,931
Quote:
Originally Posted by Baker View Post
I don't think you can get pre-approved on a boat...generally speaking. The make/model/year of the boat make a HUGE difference in their decision to lend money. Marine lending is SIGNIFICANTLY different than lending money on homes. And the main difference is the collateral involved(it is a dereciating asset...it can sink...it can be stolen...it can "go away",etc.). You were asking for a loan where the collateral was unknown. .
Ten years ago we were pre approved before the vessel was selected or purchased. We bad never done business with this bank before. The primary caveat was newer than 20 years. Three years ago the same thing using an LOC although the deal never went through.

Our banking friends tell us that a surprising number of loans fail due to personal history such as drugs, DUIs, messy recent divorces, tax difficulties or court proceedings.
sunchaser is offline   Reply With Quote
Old 11-16-2015, 10:34 AM   #71
Guru
 
MYTraveler's Avatar
 
City: West Coast
Country: USA
Join Date: Apr 2014
Posts: 784
Quote:
Originally Posted by smitty477 View Post
"If you do, you won't be entitled to a home mortgage interest deduction. That applies only to acquisition indebtedness or refinances of acquisition indebtedness."


Please help me locate this treatment in the tax document.


https://www.irs.gov/publications/p936/ar02.html

It is item 3, which limits the deduction to $100k of debt if not acquisition indebtedness.
MYTraveler is offline   Reply With Quote
Old 11-16-2015, 10:36 AM   #72
Guru
 
MYTraveler's Avatar
 
City: West Coast
Country: USA
Join Date: Apr 2014
Posts: 784
Quote:
Originally Posted by smitty477 View Post

But if you do itemize (like us) you will realize the interest deduction in the year that it is paid and that can be in excess of 1/3rd the payment in early years - we are very lucky to be in NY where the rates are near the highest.
The ONLY way to get the deduction is to itemize it. But if you are subject to AMT, which is a function of your AGI, you may loose the benefit of that deduction. Talk with your tax advisor.
MYTraveler is offline   Reply With Quote
Old 11-16-2015, 10:38 AM   #73
TF Site Team
 
ksanders's Avatar
 
City: SEWARD ALASKA
Country: USA
Vessel Name: LISAS WAY
Vessel Model: BAYLINER 4788
Join Date: Feb 2011
Posts: 3,646
We found that our local credit union was the best bet.

15 minutes on the phone and we were pre approved for up to the amount we asked for, subject to survey to determine value once we actually picked a boat.

As far as taxes, the boat loan is treated as a home interest deduction on our return. With that decuction and the reletavly low interest rate, the cost of the money is very little.

Even if I could have written a check for our boat without raiding retirement funds I don't think I would have.
__________________
Kevin Sanders
Bayliner 4788
Seward, Alaska
www.mvlisasway.com
ksanders is offline   Reply With Quote
Old 11-16-2015, 10:38 AM   #74
Guru
 
MYTraveler's Avatar
 
City: West Coast
Country: USA
Join Date: Apr 2014
Posts: 784
Quote:
Originally Posted by smitty477 View Post
If you do not remove funds from a tax deferred account it will continue to receive whatever interest it collect tax free.
You, or your heirs, will have to pay tax on that income (unless Cruz is elected). In the meantime, it is merely tax deferred. Moreover, you can borrow against the account.
MYTraveler is offline   Reply With Quote
Old 11-16-2015, 10:40 AM   #75
Guru
 
City: Northport
Country: USA
Join Date: Aug 2015
Posts: 537
There are a lot of number 3's in the document - do you mean this number 3?




"Mortgages you took out after October 13, 1987, other than to buy, build, or improve your home (called home equity debt), but only if throughout 2014 these mortgages totaled $100,000 or less ($50,000 or less if married filing separately) and totaled no more than the fair market value of your home reduced by (1) and (2)."
smitty477 is offline   Reply With Quote
Old 11-16-2015, 10:43 AM   #76
Guru
 
MYTraveler's Avatar
 
City: West Coast
Country: USA
Join Date: Apr 2014
Posts: 784
Quote:
Originally Posted by smitty477 View Post
There are a lot of number 3's in the document - do you mean this number 3?



"Mortgages you took out after October 13, 1987, other than to buy, build, or improve your home (called home equity debt), but only if throughout 2014 these mortgages totaled $100,000 or less ($50,000 or less if married filing separately) and totaled no more than the fair market value of your home reduced by (1) and (2)."
Yes. I should have said the first 3.
MYTraveler is offline   Reply With Quote
Old 11-16-2015, 10:44 AM   #77
Guru
 
BandB's Avatar
 
City: Fort Lauderdale
Country: USA
Join Date: Jan 2014
Posts: 10,708
Quote:
Originally Posted by smitty477 View Post
"You are comparing after-tax cost with before tax return."

If you do not remove funds from a tax deferred account it will continue to receive whatever interest it collect tax free.


.
Please do not use the terms "tax free" as that really is misleading. It's "tax deferred". Deferring tax is also something that is often assumed to be good. It may be good as it gets the amount taxed when one is paying lower tax rates. However, if tax rates increase, then that would change. More common though is that while the rate at the time of payment may be lower it's often when one is on a fixed income and may actually hit them worse. It can also have a double whammy for those on social security in terms of their taxation.

Again, not saying it's bad, just saying it's unfair to compare after tax expense to pre-tax income. You can perhaps use a lower tax rate on the income but there will be tax.

The only tax free income in the US is municipal and state bonds (not bond mutual funds either) and they are on the low side of earnings as a result. Plus AMT as mentioned above can change any tax equation.
BandB is offline   Reply With Quote
Old 11-16-2015, 10:48 AM   #78
Guru
 
City: Northport
Country: USA
Join Date: Aug 2015
Posts: 537
"Please do not use the terms "tax free" as that really is misleading."
But I actually did say tax deferred exactly you quoted me - it will collect tax free but is in a tax deferred account.
smitty477 is offline   Reply With Quote
Old 11-16-2015, 10:52 AM   #79
Guru
 
City: Northport
Country: USA
Join Date: Aug 2015
Posts: 537
"You, or your heirs, will have to pay tax on that income (unless Cruz is elected). In the meantime, it is merely tax deferred. Moreover, you can borrow against the account."


Yes - agreed someday you or your heirs will need to pay some amount of taxes on some accumulated wealth in these accounts. You will also likely be able to borrow against them for specified reasons without penalties as is currently afforded. Or you could have used cash as an alternative to buy a boat and measured the merits of that method depending upon your personal situation.
smitty477 is offline   Reply With Quote
Old 11-16-2015, 10:53 AM   #80
Guru
 
City: Northport
Country: USA
Join Date: Aug 2015
Posts: 537
"Yes. I should have said the first 3."


Thanks - I did not know that as I never paid cash and then reified the same item.
__________________

smitty477 is offline   Reply With Quote
Reply

Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off





All times are GMT -5. The time now is 07:29 AM.


Powered by vBulletin® Version 3.8.8 Beta 4
Copyright ©2000 - 2017, vBulletin Solutions, Inc.
Search Engine Optimization by vBSEO 3.6.0
Copyright 2006 - 2012